Correlation Between KOBE STEEL and Mount Gibson

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

By analyzing existing cross correlation between KOBE STEEL LTD and Mount Gibson Iron, you can compare the effects of market volatilities on KOBE STEEL and Mount Gibson 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 KOBE STEEL with a short position of Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOBE STEEL and Mount Gibson.

Diversification Opportunities for KOBE STEEL and Mount Gibson

-0.21

Correlation Coefficient

KOBE STEEL  Mount Gibson

Very good diversification

The 3 months correlation between KOBE and Mount is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding KOBE STEEL LTD and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and KOBE 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 KOBE STEEL LTD are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of KOBE STEEL i.e., KOBE STEEL and Mount Gibson go up and down completely randomly.

Pair Corralation between KOBE STEEL and Mount Gibson

Assuming the 90 days trading horizon KOBE STEEL LTD is expected to generate 0.47 times more return on investment than Mount Gibson. However, KOBE STEEL LTD is 2.13 times less risky than Mount Gibson. It trades about 0.21 of its potential returns per unit of risk. Mount Gibson Iron is currently generating about 0.04 per unit of risk. If you would invest  904.00  in KOBE STEEL LTD on December 20, 2024 and sell it today you would earn a total of  275.00  from holding KOBE STEEL LTD or generate 30.42% return on investment over 90 days.

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

KOBE STEEL LTD  vs.  Mount Gibson Iron

KOBE STEEL LTD

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KOBE STEEL LTD are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, KOBE STEEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mount Gibson Iron

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mount Gibson Iron are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mount Gibson reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KOBE STEEL and Mount Gibson

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

The idea behind KOBE STEEL LTD and Mount Gibson Iron 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.