Correlation Between Companhia Siderurgica and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Companhia Siderurgica 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 Companhia Siderurgica and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Siderurgica Nacional and Nippon Steel, you can compare the effects of market volatilities on Companhia Siderurgica 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 Companhia Siderurgica with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderurgica and Nippon Steel.
Diversification Opportunities for Companhia Siderurgica and Nippon Steel
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Companhia and Nippon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderurgica Nacional and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Companhia Siderurgica 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 Companhia Siderurgica Nacional 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 Companhia Siderurgica i.e., Companhia Siderurgica and Nippon Steel go up and down completely randomly.
Pair Corralation between Companhia Siderurgica and Nippon Steel
Considering the 90-day investment horizon Companhia Siderurgica Nacional is expected to under-perform the Nippon Steel. In addition to that, Companhia Siderurgica is 1.31 times more volatile than Nippon Steel. It trades about -0.19 of its total potential returns per unit of risk. Nippon Steel is currently generating about -0.02 per unit of volatility. If you would invest 2,071 in Nippon Steel on September 22, 2024 and sell it today you would lose (74.00) from holding Nippon Steel or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Companhia Siderurgica Nacional vs. Nippon Steel
Performance |
| Timeline |
| Companhia Siderurgica |
| Nippon Steel |
Companhia Siderurgica and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Siderurgica and Nippon Steel
The main advantage of trading using opposite Companhia Siderurgica and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderurgica 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.| Companhia Siderurgica vs. Ternium SA ADR | Companhia Siderurgica vs. ArcelorMittal SA ADR | Companhia Siderurgica vs. Commercial Metals | Companhia Siderurgica vs. Outokumpu Oyj ADR |
| Nippon Steel vs. Companhia Siderurgica Nacional | Nippon Steel vs. Olympic Steel | Nippon Steel vs. Universal Stainless Alloy | Nippon Steel vs. Usinas Siderurgicas de |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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