Correlation Between Aya Gold and Japan Steel

Can any of the company-specific risk be diversified away by investing in both Aya Gold and Japan 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 Aya Gold and Japan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aya Gold Silver and The Japan Steel, you can compare the effects of market volatilities on Aya Gold and Japan 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 Aya Gold with a short position of Japan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aya Gold and Japan Steel.

Diversification Opportunities for Aya Gold and Japan Steel

0.22

Correlation Coefficient

Aya Gold  Japan Steel

Modest diversification

The 3 months correlation between Aya and Japan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aya Gold Silver and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel and Aya Gold 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 Aya Gold Silver are associated (or correlated) with Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of Aya Gold i.e., Aya Gold and Japan Steel go up and down completely randomly.

Pair Corralation between Aya Gold and Japan Steel

Assuming the 90 days trading horizon Aya Gold is expected to generate 4.81 times less return on investment than Japan Steel. But when comparing it to its historical volatility, Aya Gold Silver is 1.02 times less risky than Japan Steel. It trades about 0.01 of its potential returns per unit of risk. The Japan Steel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,780  in The Japan Steel on December 19, 2024 and sell it today you would earn a total of  80.00  from holding The Japan Steel or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aya Gold Silver  vs.  The Japan Steel

Aya Gold Silver

Risk-Adjusted Performance

Weak

Over the last 90 days Aya Gold Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Aya Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Steel

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aya Gold and Japan Steel

The main advantage of trading using opposite Aya Gold and Japan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aya Gold position performs unexpectedly, Japan 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 Japan Steel will offset losses from the drop in Japan Steel's long position.

The idea behind Aya Gold Silver and The Japan 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.