Correlation Between BTC Digital and Nippon Steel

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

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

Diversification Opportunities for BTC Digital and Nippon Steel

-0.11

Correlation Coefficient

BTC Digital  Nippon Steel

Good diversification

The 3 months correlation between BTC and Nippon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BTC Digital 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 BTC Digital 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 BTC Digital 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 BTC Digital i.e., BTC Digital and Nippon Steel go up and down completely randomly.

Pair Corralation between BTC Digital and Nippon Steel

Assuming the 90 days horizon BTC Digital is expected to generate 11.59 times more return on investment than Nippon Steel. However, BTC Digital is 11.59 times more volatile than Nippon Steel Corp. It trades about 0.07 of its potential returns per unit of risk. Nippon Steel Corp is currently generating about -0.05 per unit of risk. If you would invest  5.21  in BTC Digital on October 10, 2024 and sell it today you would lose (0.22) from holding BTC Digital or give up 4.22% of portfolio value over 90 days.

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

BTC Digital  vs.  Nippon Steel Corp

BTC Digital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Digital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, BTC Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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 BTC Digital and Nippon Steel

The main advantage of trading using opposite BTC Digital and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTC Digital 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 BTC Digital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.