Correlation Between Mondi PLC and Nitto Denko

Can any of the company-specific risk be diversified away by investing in both Mondi PLC and Nitto Denko 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 Mondi PLC and Nitto Denko into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mondi PLC ADR and Nitto Denko Corp, you can compare the effects of market volatilities on Mondi PLC and Nitto Denko 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 Mondi PLC with a short position of Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mondi PLC and Nitto Denko.

Diversification Opportunities for Mondi PLC and Nitto Denko

-0.15

Correlation Coefficient

Mondi PLC  Nitto Denko

Good diversification

The 3 months correlation between Mondi and Nitto is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mondi PLC ADR and Nitto Denko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko Corp and Mondi PLC 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 Mondi PLC ADR are associated (or correlated) with Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko Corp has no effect on the direction of Mondi PLC i.e., Mondi PLC and Nitto Denko go up and down completely randomly.

Pair Corralation between Mondi PLC and Nitto Denko

Assuming the 90 days horizon Mondi PLC is expected to generate 1.71 times less return on investment than Nitto Denko. In addition to that, Mondi PLC is 1.09 times more volatile than Nitto Denko Corp. It trades about 0.14 of its total potential returns per unit of risk. Nitto Denko Corp is currently generating about 0.27 per unit of volatility. If you would invest  1,652  in Nitto Denko Corp on October 24, 2024 and sell it today you would earn a total of  99.00  from holding Nitto Denko Corp or generate 5.99% return on investment over 90 days.

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

Mondi PLC ADR  vs.  Nitto Denko Corp

Mondi PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondi PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nitto Denko Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nitto Denko Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, Nitto Denko may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mondi PLC and Nitto Denko

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

The idea behind Mondi PLC ADR and Nitto Denko 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.