Correlation Between SERI INDUSTRIAL and NIPPON STEEL
Can any of the company-specific risk be diversified away by investing in both SERI INDUSTRIAL 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 SERI INDUSTRIAL and NIPPON STEEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SERI INDUSTRIAL EO and NIPPON STEEL SPADR, you can compare the effects of market volatilities on SERI INDUSTRIAL 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 SERI INDUSTRIAL with a short position of NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SERI INDUSTRIAL and NIPPON STEEL.
Diversification Opportunities for SERI INDUSTRIAL and NIPPON STEEL
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SERI and NIPPON is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding SERI INDUSTRIAL EO and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR and SERI INDUSTRIAL 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 SERI INDUSTRIAL EO 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 SPADR has no effect on the direction of SERI INDUSTRIAL i.e., SERI INDUSTRIAL and NIPPON STEEL go up and down completely randomly.
Pair Corralation between SERI INDUSTRIAL and NIPPON STEEL
Assuming the 90 days trading horizon SERI INDUSTRIAL EO is expected to under-perform the NIPPON STEEL. But the stock apears to be less risky and, when comparing its historical volatility, SERI INDUSTRIAL EO is 2.7 times less risky than NIPPON STEEL. The stock trades about -0.02 of its potential returns per unit of risk. The NIPPON STEEL SPADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 462.00 in NIPPON STEEL SPADR on September 2, 2024 and sell it today you would earn a total of 153.00 from holding NIPPON STEEL SPADR or generate 33.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SERI INDUSTRIAL EO vs. NIPPON STEEL SPADR
Performance |
| Timeline |
| SERI INDUSTRIAL EO |
| NIPPON STEEL SPADR |
SERI INDUSTRIAL and NIPPON STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SERI INDUSTRIAL and NIPPON STEEL
The main advantage of trading using opposite SERI INDUSTRIAL and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SERI INDUSTRIAL 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.| SERI INDUSTRIAL vs. Apple Inc | SERI INDUSTRIAL vs. Apple Inc | SERI INDUSTRIAL vs. Apple Inc | SERI INDUSTRIAL vs. Apple Inc |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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