Correlation Between Gaztransport Technigaz and Nippon Steel

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

By analyzing existing cross correlation between Gaztransport Technigaz SA and Nippon Steel, you can compare the effects of market volatilities on Gaztransport Technigaz 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 Gaztransport Technigaz with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaztransport Technigaz and Nippon Steel.

Diversification Opportunities for Gaztransport Technigaz and Nippon Steel

-0.36

Correlation Coefficient

Gaztransport Technigaz  Nippon Steel

Very good diversification

The 3 months correlation between Gaztransport and Nippon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gaztransport Technigaz SA and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Gaztransport Technigaz 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 Gaztransport Technigaz SA 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 Gaztransport Technigaz i.e., Gaztransport Technigaz and Nippon Steel go up and down completely randomly.

Pair Corralation between Gaztransport Technigaz and Nippon Steel

Assuming the 90 days horizon Gaztransport Technigaz SA is expected to generate 0.98 times more return on investment than Nippon Steel. However, Gaztransport Technigaz SA is 1.02 times less risky than Nippon Steel. It trades about 0.05 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.02 per unit of risk. If you would invest  9,212  in Gaztransport Technigaz SA on September 20, 2024 and sell it today you would earn a total of  3,788  from holding Gaztransport Technigaz SA or generate 41.12% return on investment over 90 days.

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

Gaztransport Technigaz SA  vs.  Nippon Steel

Gaztransport Technigaz

Risk-Adjusted Performance

3 of 100

Insignificant

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

Nippon Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Gaztransport Technigaz and Nippon Steel

The main advantage of trading using opposite Gaztransport Technigaz and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gaztransport Technigaz 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 Gaztransport Technigaz SA 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.