Correlation Between NIPPON PROLOGIS and International Business

Can any of the company-specific risk be diversified away by investing in both NIPPON PROLOGIS and International Business 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 NIPPON PROLOGIS and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIPPON PROLOGIS REIT and International Business Machines, you can compare the effects of market volatilities on NIPPON PROLOGIS and International Business 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 NIPPON PROLOGIS with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON PROLOGIS and International Business.

Diversification Opportunities for NIPPON PROLOGIS and International Business

-0.25

Correlation Coefficient

NIPPON PROLOGIS  International Business

Very good diversification

The 3 months correlation between NIPPON and International is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON PROLOGIS REIT and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and NIPPON PROLOGIS 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 NIPPON PROLOGIS REIT are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of NIPPON PROLOGIS i.e., NIPPON PROLOGIS and International Business go up and down completely randomly.

Pair Corralation between NIPPON PROLOGIS and International Business

Assuming the 90 days trading horizon NIPPON PROLOGIS REIT is expected to under-perform the International Business. In addition to that, NIPPON PROLOGIS is 1.64 times more volatile than International Business Machines. It trades about -0.13 of its total potential returns per unit of risk. International Business Machines is currently generating about -0.18 per unit of volatility. If you would invest  22,110  in International Business Machines on October 5, 2024 and sell it today you would lose (675.00) from holding International Business Machines or give up 3.05% of portfolio value over 90 days.

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

NIPPON PROLOGIS REIT  vs.  International Business Machine

NIPPON PROLOGIS REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON PROLOGIS REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIPPON PROLOGIS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

International Business

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, International Business is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NIPPON PROLOGIS and International Business

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

The idea behind NIPPON PROLOGIS REIT and International Business Machines 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.