Correlation Between Nippon Steel and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Ameren Illinois 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 Ameren Illinois into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel Corp and Ameren Illinois, you can compare the effects of market volatilities on Nippon Steel and Ameren Illinois 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 Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Ameren Illinois.
Diversification Opportunities for Nippon Steel and Ameren Illinois
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nippon and Ameren is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel Corp and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois 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 Corp are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of Nippon Steel i.e., Nippon Steel and Ameren Illinois go up and down completely randomly.
Pair Corralation between Nippon Steel and Ameren Illinois
Assuming the 90 days horizon Nippon Steel is expected to generate 1.14 times less return on investment than Ameren Illinois. But when comparing it to its historical volatility, Nippon Steel Corp is 1.33 times less risky than Ameren Illinois. It trades about 0.04 of its potential returns per unit of risk. Ameren Illinois is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,480 in Ameren Illinois on November 4, 2024 and sell it today you would earn a total of 70.00 from holding Ameren Illinois or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Nippon Steel Corp vs. Ameren Illinois
Performance |
| Timeline |
| Nippon Steel Corp |
| Ameren Illinois |
Nippon Steel and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Steel and Ameren Illinois
The main advantage of trading using opposite Nippon Steel and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Ameren Illinois 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 Ameren Illinois will offset losses from the drop in Ameren Illinois' long position.| Nippon Steel vs. Olympic Steel | Nippon Steel vs. POSCO Holdings | Nippon Steel vs. Steel Dynamics | Nippon Steel vs. Outokumpu Oyj ADR |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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