Correlation Between NORTHEAST UTILITIES and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and Nippon Steel 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 NORTHEAST UTILITIES and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Nippon Steel, you can compare the effects of market volatilities on NORTHEAST UTILITIES and Nippon Steel 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 NORTHEAST UTILITIES with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Nippon Steel.
Diversification Opportunities for NORTHEAST UTILITIES and Nippon Steel
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between NORTHEAST and Nippon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Nippon Steel go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Nippon Steel
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the Nippon Steel. But the stock apears to be less risky and, when comparing its historical volatility, NORTHEAST UTILITIES is 1.24 times less risky than Nippon Steel. The stock trades about -0.02 of its potential returns per unit of risk. The Nippon Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,823 in Nippon Steel on September 1, 2024 and sell it today you would earn a total of 88.00 from holding Nippon Steel or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Nippon Steel
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Nippon Steel |
NORTHEAST UTILITIES and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Nippon Steel
The main advantage of trading using opposite NORTHEAST UTILITIES and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, Nippon Steel 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 Nippon Steel will offset losses from the drop in Nippon Steel's long position.| NORTHEAST UTILITIES vs. SIVERS SEMICONDUCTORS AB | NORTHEAST UTILITIES vs. Darden Restaurants | NORTHEAST UTILITIES vs. Reliance Steel Aluminum | NORTHEAST UTILITIES vs. Q2M Managementberatung AG |
| Nippon Steel vs. COSMOSTEEL HLDGS | Nippon Steel vs. LEGACY IRON ORE | Nippon Steel vs. BlueScope Steel Limited | Nippon Steel vs. Daido Steel Co |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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