Correlation Between Japan Steel and Hoist Finance

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Can any of the company-specific risk be diversified away by investing in both Japan Steel and Hoist Finance 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 Japan Steel and Hoist Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Japan Steel and Hoist Finance AB, you can compare the effects of market volatilities on Japan Steel and Hoist Finance 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 Japan Steel with a short position of Hoist Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Steel and Hoist Finance.

Diversification Opportunities for Japan Steel and Hoist Finance

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Japan and Hoist is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel and Hoist Finance AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoist Finance AB and Japan Steel 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 The Japan Steel are associated (or correlated) with Hoist Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoist Finance AB has no effect on the direction of Japan Steel i.e., Japan Steel and Hoist Finance go up and down completely randomly.

Pair Corralation between Japan Steel and Hoist Finance

Assuming the 90 days horizon The Japan Steel is expected to generate 1.39 times more return on investment than Hoist Finance. However, Japan Steel is 1.39 times more volatile than Hoist Finance AB. It trades about 0.06 of its potential returns per unit of risk. Hoist Finance AB is currently generating about -0.04 per unit of risk. If you would invest  3,280  in The Japan Steel on October 7, 2024 and sell it today you would earn a total of  180.00  from holding The Japan Steel or generate 5.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Japan Steel  vs.  Hoist Finance AB

 Performance 
       Timeline  
Japan Steel 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Steel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Hoist Finance AB 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hoist Finance AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Hoist Finance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Japan Steel and Hoist Finance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Japan Steel and Hoist Finance

The main advantage of trading using opposite Japan Steel and Hoist Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Steel position performs unexpectedly, Hoist Finance 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 Hoist Finance will offset losses from the drop in Hoist Finance's long position.
The idea behind The Japan Steel and Hoist Finance AB 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.
Check out your portfolio center.
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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