Correlation Between Nippon Steel and Imperial Metals
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Imperial Metals 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 Imperial Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Imperial Metals, you can compare the effects of market volatilities on Nippon Steel and Imperial Metals 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 Imperial Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Imperial Metals.
Diversification Opportunities for Nippon Steel and Imperial Metals
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nippon and Imperial is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals 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 Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of Nippon Steel i.e., Nippon Steel and Imperial Metals go up and down completely randomly.
Pair Corralation between Nippon Steel and Imperial Metals
Assuming the 90 days trading horizon Nippon Steel is expected to generate 1.32 times less return on investment than Imperial Metals. But when comparing it to its historical volatility, Nippon Steel is 1.78 times less risky than Imperial Metals. It trades about 0.05 of its potential returns per unit of risk. Imperial Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 120.00 in Imperial Metals on November 3, 2024 and sell it today you would earn a total of 12.00 from holding Imperial Metals or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Steel vs. Imperial Metals
Performance |
| Timeline |
| Nippon Steel |
| Imperial Metals |
Nippon Steel and Imperial Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Imperial Metals
The main advantage of trading using opposite Nippon Steel and Imperial Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Imperial Metals 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 Imperial Metals will offset losses from the drop in Imperial Metals' long position.| Nippon Steel vs. FLOW TRADERS LTD | Nippon Steel vs. BURLINGTON STORES | Nippon Steel vs. GOME Retail Holdings | Nippon Steel vs. BJs Wholesale Club |
| Imperial Metals vs. Hua Hong Semiconductor | Imperial Metals vs. AECOM TECHNOLOGY | Imperial Metals vs. Cognizant Technology Solutions | Imperial Metals vs. Semiconductor Manufacturing International |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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