Correlation Between KVH Industries and Nippon Steel

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

By analyzing existing cross correlation between KVH Industries and Nippon Steel Corp, you can compare the effects of market volatilities on KVH Industries and Nippon Steel 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 KVH Industries with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of KVH Industries and Nippon Steel.

Diversification Opportunities for KVH Industries and Nippon Steel

-0.04

Correlation Coefficient

KVH Industries  Nippon Steel

Good diversification

The 3 months correlation between KVH and Nippon is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp and KVH Industries 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 KVH Industries are associated (or correlated) with Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel Corp has no effect on the direction of KVH Industries i.e., KVH Industries and Nippon Steel go up and down completely randomly.

Pair Corralation between KVH Industries and Nippon Steel

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Nippon Steel. In addition to that, KVH Industries is 1.43 times more volatile than Nippon Steel Corp. It trades about -0.12 of its total potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.07 per unit of volatility. If you would invest  680.00  in Nippon Steel Corp on October 9, 2024 and sell it today you would earn a total of  12.00  from holding Nippon Steel Corp or generate 1.76% return on investment over 90 days.

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

KVH Industries  vs.  Nippon Steel Corp

KVH Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Nippon Steel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KVH Industries and Nippon Steel

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

The idea behind KVH Industries and Nippon Steel 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.