Correlation Between Retailors and Nissan
Can any of the company-specific risk be diversified away by investing in both Retailors and Nissan 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 Retailors and Nissan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retailors and Nissan, you can compare the effects of market volatilities on Retailors and Nissan 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 Retailors with a short position of Nissan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retailors and Nissan.
Diversification Opportunities for Retailors and Nissan
Significant diversification
The 3 months correlation between Retailors and Nissan is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Retailors and Nissan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan and Retailors 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 Retailors are associated (or correlated) with Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan has no effect on the direction of Retailors i.e., Retailors and Nissan go up and down completely randomly.
Pair Corralation between Retailors and Nissan
Assuming the 90 days trading horizon Retailors is expected to generate 0.83 times more return on investment than Nissan. However, Retailors is 1.2 times less risky than Nissan. It trades about 0.23 of its potential returns per unit of risk. Nissan is currently generating about -0.05 per unit of risk. If you would invest 652,400 in Retailors on September 5, 2024 and sell it today you would earn a total of 92,400 from holding Retailors or generate 14.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retailors vs. Nissan
Performance |
| Timeline |
| Retailors |
| Nissan |
Retailors and Nissan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retailors and Nissan
The main advantage of trading using opposite Retailors and Nissan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retailors position performs unexpectedly, Nissan 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 Nissan will offset losses from the drop in Nissan's long position.| Retailors vs. Nice | Retailors vs. The Gold Bond | Retailors vs. Bank Leumi Le Israel | Retailors vs. ICL Israel Chemicals |
| Nissan vs. Shagrir Group Vehicle | Nissan vs. Retailors | Nissan vs. Polyram Plastic Industries | Nissan vs. Israel Discount Bank |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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