Correlation Between Universal Stainless and Nippon Steel
Can any of the company-specific risk be diversified away by investing in both Universal Stainless 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 Universal Stainless and Nippon Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Stainless Alloy and Nippon Steel, you can compare the effects of market volatilities on Universal Stainless 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 Universal Stainless with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Nippon Steel.
Diversification Opportunities for Universal Stainless and Nippon Steel
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Universal and Nippon is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and Nippon Steel go up and down completely randomly.
Pair Corralation between Universal Stainless and Nippon Steel
Given the investment horizon of 90 days Universal Stainless is expected to generate 7.59 times less return on investment than Nippon Steel. But when comparing it to its historical volatility, Universal Stainless Alloy is 4.7 times less risky than Nippon Steel. It trades about 0.19 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.31 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Stainless Alloy vs. Nippon Steel
Performance |
| Timeline |
| Universal Stainless Alloy |
| Nippon Steel |
Universal Stainless and Nippon Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Stainless and Nippon Steel
The main advantage of trading using opposite Universal Stainless and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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.| Universal Stainless vs. Olympic Steel | Universal Stainless vs. Outokumpu Oyj ADR | Universal Stainless vs. Usinas Siderurgicas de | Universal Stainless vs. POSCO Holdings |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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