Correlation Between Nippon Light and East Japan
Can any of the company-specific risk be diversified away by investing in both Nippon Light and East Japan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nippon Light and East Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Light Metal and East Japan Railway, you can compare the effects of market volatilities on Nippon Light and East Japan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nippon Light with a short position of East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Light and East Japan.
Diversification Opportunities for Nippon Light and East Japan
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nippon and East is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway and Nippon Light is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nippon Light Metal are associated (or correlated) with East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of Nippon Light i.e., Nippon Light and East Japan go up and down completely randomly.
Pair Corralation between Nippon Light and East Japan
Assuming the 90 days horizon Nippon Light Metal is expected to generate 1.49 times more return on investment than East Japan. However, Nippon Light is 1.49 times more volatile than East Japan Railway. It trades about 0.05 of its potential returns per unit of risk. East Japan Railway is currently generating about 0.04 per unit of risk. If you would invest 935.00 in Nippon Light Metal on November 3, 2024 and sell it today you would earn a total of 15.00 from holding Nippon Light Metal or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Light Metal vs. East Japan Railway
Performance |
| Timeline |
| Nippon Light Metal |
| East Japan Railway |
Nippon Light and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Light and East Japan
The main advantage of trading using opposite Nippon Light and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Light position performs unexpectedly, East Japan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in East Japan will offset losses from the drop in East Japan's long position.| Nippon Light vs. OURGAME INTHOLDL 00005 | Nippon Light vs. Gol Intelligent Airlines | Nippon Light vs. PENN NATL GAMING | Nippon Light vs. SINGAPORE AIRLINES |
| East Japan vs. Coffee Holding Co | East Japan vs. Transport International Holdings | East Japan vs. GOLD ROAD RES | East Japan vs. Air Transport Services |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |