Correlation Between Japan Steel and MAG SILVER

Can any of the company-specific risk be diversified away by investing in both Japan Steel and MAG SILVER 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 MAG SILVER 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 MAG SILVER, you can compare the effects of market volatilities on Japan Steel and MAG SILVER 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 MAG SILVER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Steel and MAG SILVER.

Diversification Opportunities for Japan Steel and MAG SILVER

-0.38

Correlation Coefficient

Japan Steel  MAG SILVER

Very good diversification

The 3 months correlation between Japan and MAG is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel and MAG SILVER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG SILVER 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 MAG SILVER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG SILVER has no effect on the direction of Japan Steel i.e., Japan Steel and MAG SILVER go up and down completely randomly.

Pair Corralation between Japan Steel and MAG SILVER

Assuming the 90 days horizon The Japan Steel is expected to under-perform the MAG SILVER. But the stock apears to be less risky and, when comparing its historical volatility, The Japan Steel is 1.28 times less risky than MAG SILVER. The stock trades about -0.2 of its potential returns per unit of risk. The MAG SILVER is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,336  in MAG SILVER on October 23, 2024 and sell it today you would earn a total of  143.00  from holding MAG SILVER or generate 10.7% return on investment over 90 days.

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

The Japan Steel  vs.  MAG SILVER

Japan Steel

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Steel reported solid returns over the last few months and may actually be approaching a breakup point.

MAG SILVER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAG SILVER 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 Japan Steel and MAG SILVER

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

The idea behind The Japan Steel and MAG SILVER 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.