Correlation Between EPSILON HEALTHCARE and Nippon Steel

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

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

Diversification Opportunities for EPSILON HEALTHCARE and Nippon Steel

0.0

Correlation Coefficient

EPSILON HEALTHCARE  Nippon Steel

Pay attention - limited upside

The 3 months correlation between EPSILON and Nippon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EPSILON HEALTHCARE LTD and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and EPSILON HEALTHCARE 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 EPSILON HEALTHCARE LTD 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 EPSILON HEALTHCARE i.e., EPSILON HEALTHCARE and Nippon Steel go up and down completely randomly.

Pair Corralation between EPSILON HEALTHCARE and Nippon Steel

Assuming the 90 days trading horizon EPSILON HEALTHCARE LTD is expected to under-perform the Nippon Steel. But the stock apears to be less risky and, when comparing its historical volatility, EPSILON HEALTHCARE LTD is 1.5 times less risky than Nippon Steel. The stock trades about -0.03 of its potential returns per unit of risk. The Nippon Steel is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,103  in Nippon Steel on October 5, 2024 and sell it today you would lose (194.00) from holding Nippon Steel or give up 9.22% of portfolio value over 90 days.

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

EPSILON HEALTHCARE LTD  vs.  Nippon Steel

EPSILON HEALTHCARE LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EPSILON HEALTHCARE LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, EPSILON HEALTHCARE is not utilizing all of its potentials. The current 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 comparatively stable basic indicators, Nippon Steel 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 EPSILON HEALTHCARE and Nippon Steel

The main advantage of trading using opposite EPSILON HEALTHCARE and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EPSILON HEALTHCARE 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 EPSILON HEALTHCARE LTD 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.