Correlation Between Nippon Steel and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Chongqing Machinery 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 Chongqing Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Chongqing Machinery Electric, you can compare the effects of market volatilities on Nippon Steel and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Chongqing Machinery.
Diversification Opportunities for Nippon Steel and Chongqing Machinery
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nippon and Chongqing is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of Nippon Steel i.e., Nippon Steel and Chongqing Machinery go up and down completely randomly.
Pair Corralation between Nippon Steel and Chongqing Machinery
Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.76 times more return on investment than Chongqing Machinery. However, Nippon Steel is 1.32 times less risky than Chongqing Machinery. It trades about 0.09 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.04 per unit of risk. If you would invest 1,825 in Nippon Steel on August 28, 2024 and sell it today you would earn a total of 55.00 from holding Nippon Steel or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Steel vs. Chongqing Machinery Electric
Performance |
| Timeline |
| Nippon Steel |
| Chongqing Machinery |
Nippon Steel and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Chongqing Machinery
The main advantage of trading using opposite Nippon Steel and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| Nippon Steel vs. GREENX METALS LTD | Nippon Steel vs. ADRIATIC METALS LS 013355 | Nippon Steel vs. Amkor Technology | Nippon Steel vs. Vishay Intertechnology |
| Chongqing Machinery vs. Park Hotels Resorts | Chongqing Machinery vs. Materialise NV | Chongqing Machinery vs. InterContinental Hotels Group | Chongqing Machinery vs. Summit Hotel Properties |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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