Correlation Between Nippon Steel and Metso Outotec
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Metso Outotec 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 Metso Outotec into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Metso Outotec Oyj, you can compare the effects of market volatilities on Nippon Steel and Metso Outotec 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 Metso Outotec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Metso Outotec.
Diversification Opportunities for Nippon Steel and Metso Outotec
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nippon and Metso is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj 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 Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of Nippon Steel i.e., Nippon Steel and Metso Outotec go up and down completely randomly.
Pair Corralation between Nippon Steel and Metso Outotec
Assuming the 90 days trading horizon Nippon Steel is expected to generate 1.64 times more return on investment than Metso Outotec. However, Nippon Steel is 1.64 times more volatile than Metso Outotec Oyj. It trades about 0.13 of its potential returns per unit of risk. Metso Outotec Oyj is currently generating about -0.05 per unit of risk. If you would invest 1,809 in Nippon Steel on October 20, 2024 and sell it today you would earn a total of 86.00 from holding Nippon Steel or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Nippon Steel vs. Metso Outotec Oyj
Performance |
| Timeline |
| Nippon Steel |
| Metso Outotec Oyj |
Nippon Steel and Metso Outotec Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Metso Outotec
The main advantage of trading using opposite Nippon Steel and Metso Outotec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Metso Outotec 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 Metso Outotec will offset losses from the drop in Metso Outotec's long position.| Nippon Steel vs. ARISTOCRAT LEISURE | Nippon Steel vs. USWE SPORTS AB | Nippon Steel vs. BRIT AMER TOBACCO | Nippon Steel vs. LG Display Co |
| Metso Outotec vs. Goosehead Insurance | Metso Outotec vs. ZURICH INSURANCE GROUP | Metso Outotec vs. Adtalem Global Education | Metso Outotec vs. Insurance Australia Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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