Correlation Between NIPPON STEEL and ZINC MEDIA
Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and ZINC MEDIA 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 ZINC MEDIA 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 ZINC MEDIA GR, you can compare the effects of market volatilities on NIPPON STEEL and ZINC MEDIA 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 ZINC MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and ZINC MEDIA.
Diversification Opportunities for NIPPON STEEL and ZINC MEDIA
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NIPPON and ZINC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and ZINC MEDIA GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZINC MEDIA GR 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 ZINC MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZINC MEDIA GR has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and ZINC MEDIA go up and down completely randomly.
Pair Corralation between NIPPON STEEL and ZINC MEDIA
Assuming the 90 days trading horizon NIPPON STEEL SPADR is expected to generate 0.7 times more return on investment than ZINC MEDIA. However, NIPPON STEEL SPADR is 1.43 times less risky than ZINC MEDIA. It trades about 0.12 of its potential returns per unit of risk. ZINC MEDIA GR is currently generating about -0.17 per unit of risk. If you would invest 585.00 in NIPPON STEEL SPADR on August 28, 2024 and sell it today you would earn a total of 20.00 from holding NIPPON STEEL SPADR or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIPPON STEEL SPADR vs. ZINC MEDIA GR
Performance |
| Timeline |
| NIPPON STEEL SPADR |
| ZINC MEDIA GR |
NIPPON STEEL and ZINC MEDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIPPON STEEL and ZINC MEDIA
The main advantage of trading using opposite NIPPON STEEL and ZINC MEDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON STEEL position performs unexpectedly, ZINC MEDIA 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 ZINC MEDIA will offset losses from the drop in ZINC MEDIA's long position.The idea behind NIPPON STEEL SPADR and ZINC MEDIA GR 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.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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