Correlation Between Nippon Steel and Ping An
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Ping An 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 Ping An into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Ping An Insurance, you can compare the effects of market volatilities on Nippon Steel and Ping An 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 Ping An. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Ping An.
Diversification Opportunities for Nippon Steel and Ping An
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nippon and Ping is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Ping An Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ping An Insurance 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 Ping An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ping An Insurance has no effect on the direction of Nippon Steel i.e., Nippon Steel and Ping An go up and down completely randomly.
Pair Corralation between Nippon Steel and Ping An
Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.69 times more return on investment than Ping An. However, Nippon Steel is 1.46 times less risky than Ping An. It trades about 0.04 of its potential returns per unit of risk. Ping An Insurance is currently generating about 0.02 per unit of risk. If you would invest 1,919 in Nippon Steel on December 31, 2024 and sell it today you would earn a total of 46.00 from holding Nippon Steel or generate 2.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Steel vs. Ping An Insurance
Performance |
| Timeline |
| Nippon Steel |
| Ping An Insurance |
Nippon Steel and Ping An Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Ping An
The main advantage of trading using opposite Nippon Steel and Ping An positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Ping An 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 Ping An will offset losses from the drop in Ping An's long position.| Nippon Steel vs. Zijin Mining Group | Nippon Steel vs. Waste Management | Nippon Steel vs. MAG SILVER | Nippon Steel vs. Coor Service Management |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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