Correlation Between NAGOYA RAILROAD and CosmoSteel Holdings

Can any of the company-specific risk be diversified away by investing in both NAGOYA RAILROAD and CosmoSteel Holdings 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 NAGOYA RAILROAD and CosmoSteel Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NAGOYA RAILROAD and CosmoSteel Holdings Limited, you can compare the effects of market volatilities on NAGOYA RAILROAD and CosmoSteel Holdings 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 NAGOYA RAILROAD with a short position of CosmoSteel Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAGOYA RAILROAD and CosmoSteel Holdings.

Diversification Opportunities for NAGOYA RAILROAD and CosmoSteel Holdings

0.15

Correlation Coefficient

NAGOYA RAILROAD  CosmoSteel Holdings

Average diversification

The 3 months correlation between NAGOYA and CosmoSteel is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding NAGOYA RAILROAD and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings and NAGOYA RAILROAD 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 NAGOYA RAILROAD are associated (or correlated) with CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of NAGOYA RAILROAD i.e., NAGOYA RAILROAD and CosmoSteel Holdings go up and down completely randomly.

Pair Corralation between NAGOYA RAILROAD and CosmoSteel Holdings

Assuming the 90 days horizon NAGOYA RAILROAD is expected to generate 0.58 times more return on investment than CosmoSteel Holdings. However, NAGOYA RAILROAD is 1.74 times less risky than CosmoSteel Holdings. It trades about 0.12 of its potential returns per unit of risk. CosmoSteel Holdings Limited is currently generating about -0.17 per unit of risk. If you would invest  1,040  in NAGOYA RAILROAD on October 10, 2024 and sell it today you would earn a total of  30.00  from holding NAGOYA RAILROAD or generate 2.88% return on investment over 90 days.

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

NAGOYA RAILROAD  vs.  CosmoSteel Holdings Limited

NAGOYA RAILROAD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NAGOYA RAILROAD is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CosmoSteel Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CosmoSteel Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NAGOYA RAILROAD and CosmoSteel Holdings

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

The idea behind NAGOYA RAILROAD and CosmoSteel Holdings Limited 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.