Correlation Between Nippon Steel and Air Lease
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Air Lease 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 Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Air Lease, you can compare the effects of market volatilities on Nippon Steel and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Air Lease.
Diversification Opportunities for Nippon Steel and Air Lease
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nippon and Air is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Nippon Steel i.e., Nippon Steel and Air Lease go up and down completely randomly.
Pair Corralation between Nippon Steel and Air Lease
Assuming the 90 days trading horizon Nippon Steel is expected to under-perform the Air Lease. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Steel is 1.39 times less risky than Air Lease. The stock trades about -0.14 of its potential returns per unit of risk. The Air Lease is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,519 in Air Lease on September 21, 2024 and sell it today you would earn a total of 21.00 from holding Air Lease or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Steel vs. Air Lease
Performance |
| Timeline |
| Nippon Steel |
| Air Lease |
Nippon Steel and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Air Lease
The main advantage of trading using opposite Nippon Steel and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.The idea behind Nippon Steel and Air Lease pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Air Lease vs. CAREER EDUCATION | Air Lease vs. Strategic Education | Air Lease vs. TERADATA | Air Lease vs. Grand Canyon Education |
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 CEOs Directory module to screen CEOs from public companies around the world.
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