Correlation Between SMC Corp and Nel ASA

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Can any of the company-specific risk be diversified away by investing in both SMC Corp and Nel ASA 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 SMC Corp and Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMC Corp Japan and Nel ASA, you can compare the effects of market volatilities on SMC Corp and Nel ASA 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 SMC Corp with a short position of Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Nel ASA.

Diversification Opportunities for SMC Corp and Nel ASA

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between SMC and Nel is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA and SMC Corp 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 SMC Corp Japan are associated (or correlated) with Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of SMC Corp i.e., SMC Corp and Nel ASA go up and down completely randomly.

Pair Corralation between SMC Corp and Nel ASA

Assuming the 90 days horizon SMC Corp Japan is expected to generate 0.35 times more return on investment than Nel ASA. However, SMC Corp Japan is 2.83 times less risky than Nel ASA. It trades about -0.04 of its potential returns per unit of risk. Nel ASA is currently generating about -0.13 per unit of risk. If you would invest  2,147  in SMC Corp Japan on November 2, 2024 and sell it today you would lose (211.00) from holding SMC Corp Japan or give up 9.83% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SMC Corp Japan  vs.  Nel ASA

 Performance 
       Timeline  
SMC Corp Japan 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days SMC Corp Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Nel ASA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nel ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SMC Corp and Nel ASA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SMC Corp and Nel ASA

The main advantage of trading using opposite SMC Corp and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA's long position.
The idea behind SMC Corp Japan and Nel ASA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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