Correlation Between AerCap Holdings and Nippon Steel

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

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

Diversification Opportunities for AerCap Holdings and Nippon Steel

0.33

Correlation Coefficient

AerCap Holdings  Nippon Steel

Weak diversification

The 3 months correlation between AerCap and Nippon is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp and AerCap Holdings 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 AerCap Holdings NV 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 Corp has no effect on the direction of AerCap Holdings i.e., AerCap Holdings and Nippon Steel go up and down completely randomly.

Pair Corralation between AerCap Holdings and Nippon Steel

Considering the 90-day investment horizon AerCap Holdings is expected to generate 12.25 times less return on investment than Nippon Steel. But when comparing it to its historical volatility, AerCap Holdings NV is 2.02 times less risky than Nippon Steel. It trades about 0.04 of its potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  635.00  in Nippon Steel Corp on October 23, 2024 and sell it today you would earn a total of  41.00  from holding Nippon Steel Corp or generate 6.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

AerCap Holdings NV  vs.  Nippon Steel Corp

AerCap Holdings NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AerCap Holdings NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, AerCap Holdings is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nippon Steel Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Nippon Steel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AerCap Holdings and Nippon Steel

The main advantage of trading using opposite AerCap Holdings and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AerCap Holdings 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 AerCap Holdings NV and Nippon Steel Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.