Correlation Between WEC Energy and Nippon Steel

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

Diversification Opportunities for WEC Energy and Nippon Steel

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between WEC and Nippon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and WEC Energy 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 WEC Energy Group 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 WEC Energy i.e., WEC Energy and Nippon Steel go up and down completely randomly.

Pair Corralation between WEC Energy and Nippon Steel

Assuming the 90 days horizon WEC Energy Group is expected to generate 0.73 times more return on investment than Nippon Steel. However, WEC Energy Group is 1.37 times less risky than Nippon Steel. It trades about 0.09 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.03 per unit of risk. If you would invest  8,524  in WEC Energy Group on September 12, 2024 and sell it today you would earn a total of  616.00  from holding WEC Energy Group or generate 7.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

WEC Energy Group  vs.  Nippon Steel

 Performance 
       Timeline  
WEC Energy Group 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WEC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Nippon Steel 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Nippon Steel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WEC Energy and Nippon Steel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WEC Energy and Nippon Steel

The main advantage of trading using opposite WEC Energy and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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.
The idea behind WEC Energy Group and Nippon Steel 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 CEOs Directory module to screen CEOs from public companies around the world.

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