Correlation Between NIPPON STEEL and CosmoSteel Holdings
Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and CosmoSteel Holdings 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 CosmoSteel Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NIPPON STEEL SPADR and CosmoSteel Holdings Limited, you can compare the effects of market volatilities on NIPPON STEEL and CosmoSteel Holdings 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 CosmoSteel Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and CosmoSteel Holdings.
Diversification Opportunities for NIPPON STEEL and CosmoSteel Holdings
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NIPPON and CosmoSteel is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings 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 SPADR are associated (or correlated) with CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and CosmoSteel Holdings go up and down completely randomly.
Pair Corralation between NIPPON STEEL and CosmoSteel Holdings
Assuming the 90 days trading horizon NIPPON STEEL SPADR is expected to generate 1.33 times more return on investment than CosmoSteel Holdings. However, NIPPON STEEL is 1.33 times more volatile than CosmoSteel Holdings Limited. It trades about 0.02 of its potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about -0.01 per unit of risk. If you would invest 587.00 in NIPPON STEEL SPADR on August 28, 2024 and sell it today you would earn a total of 28.00 from holding NIPPON STEEL SPADR or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIPPON STEEL SPADR vs. CosmoSteel Holdings Limited
Performance |
| Timeline |
| NIPPON STEEL SPADR |
| CosmoSteel Holdings |
NIPPON STEEL and CosmoSteel Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIPPON STEEL and CosmoSteel Holdings
The main advantage of trading using opposite NIPPON STEEL and CosmoSteel Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON STEEL position performs unexpectedly, CosmoSteel Holdings 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 CosmoSteel Holdings will offset losses from the drop in CosmoSteel Holdings' long position.The idea behind NIPPON STEEL SPADR and CosmoSteel Holdings Limited 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.| CosmoSteel Holdings vs. Superior Plus Corp | CosmoSteel Holdings vs. NMI Holdings | CosmoSteel Holdings vs. Origin Agritech | CosmoSteel Holdings vs. SIVERS SEMICONDUCTORS AB |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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