Correlation Between SP Global and Nomura Holdings

Can any of the company-specific risk be diversified away by investing in both SP Global and Nomura Holdings 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 SP Global and Nomura Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP Global and Nomura Holdings, you can compare the effects of market volatilities on SP Global and Nomura Holdings 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 SP Global with a short position of Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Global and Nomura Holdings.

Diversification Opportunities for SP Global and Nomura Holdings

0.66

Correlation Coefficient

SP Global  Nomura Holdings

Poor diversification

The 3 months correlation between MHL and Nomura is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and Nomura Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings and SP Global 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 SP Global are associated (or correlated) with Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings has no effect on the direction of SP Global i.e., SP Global and Nomura Holdings go up and down completely randomly.

Pair Corralation between SP Global and Nomura Holdings

Assuming the 90 days horizon SP Global is expected to under-perform the Nomura Holdings. But the stock apears to be less risky and, when comparing its historical volatility, SP Global is 1.41 times less risky than Nomura Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The Nomura Holdings is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Nomura Holdings on September 27, 2024 and sell it today you would lose (12.00) from holding Nomura Holdings or give up 2.14% of portfolio value over 90 days.

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

SP Global  vs.  Nomura Holdings

SP Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SP Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SP Global is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nomura Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nomura Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SP Global and Nomura Holdings

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

The idea behind SP Global and Nomura Holdings 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 Stocks Directory module to find actively traded stocks across global markets.