Correlation Between NIPPON STEEL and Intel
Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and Intel 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 Intel 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 Intel, you can compare the effects of market volatilities on NIPPON STEEL and Intel 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 Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and Intel.
Diversification Opportunities for NIPPON STEEL and Intel
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NIPPON and Intel is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and Intel go up and down completely randomly.
Pair Corralation between NIPPON STEEL and Intel
Assuming the 90 days trading horizon NIPPON STEEL is expected to generate 2.17 times less return on investment than Intel. But when comparing it to its historical volatility, NIPPON STEEL SPADR is 2.77 times less risky than Intel. It trades about 0.12 of its potential returns per unit of risk. Intel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,133 in Intel on August 29, 2024 and sell it today you would earn a total of 138.00 from holding Intel or generate 6.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIPPON STEEL SPADR vs. Intel
Performance |
| Timeline |
| NIPPON STEEL SPADR |
| Intel |
NIPPON STEEL and Intel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIPPON STEEL and Intel
The main advantage of trading using opposite NIPPON STEEL and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON STEEL position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.| NIPPON STEEL vs. Steel Dynamics | NIPPON STEEL vs. Superior Plus Corp | NIPPON STEEL vs. SIVERS SEMICONDUCTORS AB | NIPPON STEEL vs. Identiv |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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