Correlation Between Nippon Steel and Voestalpine
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Voestalpine 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 Steel and Voestalpine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Voestalpine AG, you can compare the effects of market volatilities on Nippon Steel and Voestalpine 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 Steel with a short position of Voestalpine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Voestalpine.
Diversification Opportunities for Nippon Steel and Voestalpine
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nippon and Voestalpine is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Voestalpine AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voestalpine AG and Nippon Steel 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 Steel are associated (or correlated) with Voestalpine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voestalpine AG has no effect on the direction of Nippon Steel i.e., Nippon Steel and Voestalpine go up and down completely randomly.
Pair Corralation between Nippon Steel and Voestalpine
Assuming the 90 days horizon Nippon Steel is expected to generate 1.33 times more return on investment than Voestalpine. However, Nippon Steel is 1.33 times more volatile than Voestalpine AG. It trades about 0.02 of its potential returns per unit of risk. Voestalpine AG is currently generating about -0.05 per unit of risk. If you would invest 2,077 in Nippon Steel on September 2, 2024 and sell it today you would earn a total of 23.00 from holding Nippon Steel or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.58% |
| Values | Daily Returns |
Nippon Steel vs. Voestalpine AG
Performance |
| Timeline |
| Nippon Steel |
| Voestalpine AG |
Nippon Steel and Voestalpine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Voestalpine
The main advantage of trading using opposite Nippon Steel and Voestalpine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Voestalpine 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 Voestalpine will offset losses from the drop in Voestalpine's long position.| Nippon Steel vs. POSCO Holdings | Nippon Steel vs. Olympic Steel | Nippon Steel vs. Universal Stainless Alloy | Nippon Steel vs. Outokumpu Oyj ADR |
| Voestalpine vs. Steel Dynamics | Voestalpine vs. Huadi International Group | Voestalpine vs. Nucor Corp | Voestalpine vs. Cleveland Cliffs |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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