Correlation Between Outokumpu Oyj and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Outokumpu Oyj 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 Outokumpu Oyj and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Outokumpu Oyj ADR and Nippon Steel, you can compare the effects of market volatilities on Outokumpu Oyj 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 Outokumpu Oyj with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outokumpu Oyj and Nippon Steel.
Diversification Opportunities for Outokumpu Oyj and Nippon Steel
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Outokumpu and Nippon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj ADR and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Outokumpu Oyj 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 Outokumpu Oyj ADR 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 Outokumpu Oyj i.e., Outokumpu Oyj and Nippon Steel go up and down completely randomly.
Pair Corralation between Outokumpu Oyj and Nippon Steel
Assuming the 90 days horizon Outokumpu Oyj ADR is expected to under-perform the Nippon Steel. In addition to that, Outokumpu Oyj is 1.21 times more volatile than Nippon Steel. It trades about -0.09 of its total potential returns per unit of risk. Nippon Steel is currently generating about 0.31 per unit of volatility. If you would invest 1,923 in Nippon Steel on September 2, 2024 and sell it today you would earn a total of 177.00 from holding Nippon Steel or generate 9.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Outokumpu Oyj ADR vs. Nippon Steel
Performance |
| Timeline |
| Outokumpu Oyj ADR |
| Nippon Steel |
Outokumpu Oyj and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Outokumpu Oyj and Nippon Steel
The main advantage of trading using opposite Outokumpu Oyj and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Outokumpu Oyj 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.| Outokumpu Oyj vs. Olympic Steel | Outokumpu Oyj vs. POSCO Holdings | Outokumpu Oyj vs. Steel Dynamics | Outokumpu Oyj vs. Universal Stainless Alloy |
| Nippon Steel vs. POSCO Holdings | Nippon Steel vs. Olympic Steel | Nippon Steel vs. Universal Stainless Alloy | Nippon Steel vs. Outokumpu Oyj ADR |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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