Correlation Between Chubb and Nomura Holdings

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

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

Diversification Opportunities for Chubb and Nomura Holdings

-0.37

Correlation Coefficient

Chubb  Nomura Holdings

Very good diversification

The 3 months correlation between Chubb and Nomura is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR and Chubb 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 Chubb are associated (or correlated) with Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of Chubb i.e., Chubb and Nomura Holdings go up and down completely randomly.

Pair Corralation between Chubb and Nomura Holdings

Allowing for the 90-day total investment horizon Chubb is expected to generate 0.55 times more return on investment than Nomura Holdings. However, Chubb is 1.83 times less risky than Nomura Holdings. It trades about 0.05 of its potential returns per unit of risk. Nomura Holdings ADR is currently generating about 0.0 per unit of risk. If you would invest  24,338  in Chubb on October 9, 2024 and sell it today you would earn a total of  2,538  from holding Chubb or generate 10.43% return on investment over 90 days.

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

Chubb  vs.  Nomura Holdings ADR

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nomura Holdings ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nomura Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Chubb and Nomura Holdings

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

The idea behind Chubb and Nomura Holdings ADR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.