Correlation Between Snow Lake and Nissan Chemical

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

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

Diversification Opportunities for Snow Lake and Nissan Chemical

-0.38

Correlation Coefficient

Snow Lake  Nissan Chemical

Very good diversification

The 3 months correlation between Snow and Nissan is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Snow Lake Resources and Nissan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Indu and Snow Lake 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 Snow Lake Resources 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 Indu has no effect on the direction of Snow Lake i.e., Snow Lake and Nissan Chemical go up and down completely randomly.

Pair Corralation between Snow Lake and Nissan Chemical

Given the investment horizon of 90 days Snow Lake Resources is expected to generate 13.03 times more return on investment than Nissan Chemical. However, Snow Lake is 13.03 times more volatile than Nissan Chemical Industries. It trades about 0.28 of its potential returns per unit of risk. Nissan Chemical Industries is currently generating about -0.03 per unit of risk. If you would invest  18.00  in Snow Lake Resources on October 5, 2024 and sell it today you would earn a total of  78.00  from holding Snow Lake Resources or generate 433.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Snow Lake Resources  vs.  Nissan Chemical Industries

Snow Lake Resources

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snow Lake Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Snow Lake displayed solid returns over the last few months and may actually be approaching a breakup point.

Nissan Chemical Indu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Snow Lake and Nissan Chemical

The main advantage of trading using opposite Snow Lake and Nissan Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snow Lake 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 Snow Lake Resources and Nissan Chemical Industries 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.