Correlation Between Montauk Renewables and Nomura Holdings

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

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

Diversification Opportunities for Montauk Renewables and Nomura Holdings

-0.83

Correlation Coefficient

Montauk Renewables  Nomura Holdings

Pay attention - limited upside

The 3 months correlation between Montauk and Nomura is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR and Montauk Renewables 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 Montauk Renewables 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 ADR has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Nomura Holdings go up and down completely randomly.

Pair Corralation between Montauk Renewables and Nomura Holdings

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Nomura Holdings. In addition to that, Montauk Renewables is 2.05 times more volatile than Nomura Holdings ADR. It trades about -0.29 of its total potential returns per unit of risk. Nomura Holdings ADR is currently generating about -0.18 per unit of volatility. If you would invest  608.00  in Nomura Holdings ADR on September 25, 2024 and sell it today you would lose (31.00) from holding Nomura Holdings ADR or give up 5.1% of portfolio value over 90 days.

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

Montauk Renewables  vs.  Nomura Holdings ADR

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nomura Holdings ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nomura Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Montauk Renewables and Nomura Holdings

The main advantage of trading using opposite Montauk Renewables and Nomura Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables and Nomura Holdings ADR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.