Correlation Between Shin Steel and NAU IB

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

By analyzing existing cross correlation between Shin Steel Co and NAU IB Capital, you can compare the effects of market volatilities on Shin Steel and NAU IB 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 Shin Steel with a short position of NAU IB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Steel and NAU IB.

Diversification Opportunities for Shin Steel and NAU IB

0.02

Correlation Coefficient

Shin Steel  NAU IB

Significant diversification

The 3 months correlation between Shin and NAU is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shin Steel Co and NAU IB Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAU IB Capital and Shin Steel 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 Shin Steel Co are associated (or correlated) with NAU IB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAU IB Capital has no effect on the direction of Shin Steel i.e., Shin Steel and NAU IB go up and down completely randomly.

Pair Corralation between Shin Steel and NAU IB

Assuming the 90 days trading horizon Shin Steel is expected to generate 1.95 times less return on investment than NAU IB. But when comparing it to its historical volatility, Shin Steel Co is 3.91 times less risky than NAU IB. It trades about 0.48 of its potential returns per unit of risk. NAU IB Capital is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  89,007  in NAU IB Capital on October 9, 2024 and sell it today you would earn a total of  40,593  from holding NAU IB Capital or generate 45.61% return on investment over 90 days.

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

Shin Steel Co  vs.  NAU IB Capital

Shin Steel

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Shin Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shin Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NAU IB Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NAU IB Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NAU IB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Steel and NAU IB

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

The idea behind Shin Steel Co and NAU IB Capital 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.