Correlation Between Dassault Systèmes and Nissan Chemical

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

By analyzing existing cross correlation between Dassault Systmes SE and Nissan Chemical Corp, you can compare the effects of market volatilities on Dassault Systèmes and Nissan Chemical 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 Dassault Systèmes with a short position of Nissan Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dassault Systèmes and Nissan Chemical.

Diversification Opportunities for Dassault Systèmes and Nissan Chemical

-0.09

Correlation Coefficient

Dassault Systèmes  Nissan Chemical

Good diversification

The 3 months correlation between Dassault and Nissan is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systmes SE and Nissan Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Corp and Dassault Systèmes 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 Dassault Systmes SE are associated (or correlated) with Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Corp has no effect on the direction of Dassault Systèmes i.e., Dassault Systèmes and Nissan Chemical go up and down completely randomly.

Pair Corralation between Dassault Systèmes and Nissan Chemical

Assuming the 90 days horizon Dassault Systmes SE is expected to generate 1.12 times more return on investment than Nissan Chemical. However, Dassault Systèmes is 1.12 times more volatile than Nissan Chemical Corp. It trades about -0.29 of its potential returns per unit of risk. Nissan Chemical Corp is currently generating about -0.33 per unit of risk. If you would invest  3,500  in Dassault Systmes SE on October 9, 2024 and sell it today you would lose (260.00) from holding Dassault Systmes SE or give up 7.43% of portfolio value over 90 days.

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

Dassault Systmes SE  vs.  Nissan Chemical Corp

Dassault Systèmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dassault Systmes SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dassault Systèmes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nissan Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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 Dassault Systèmes and Nissan Chemical

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

The idea behind Dassault Systmes SE and Nissan Chemical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.