Correlation Between MTRLimited and Nishi Nippon

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

By analyzing existing cross correlation between MTR Limited and Nishi Nippon Railroad Co, you can compare the effects of market volatilities on MTRLimited and Nishi Nippon 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 MTRLimited with a short position of Nishi Nippon. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTRLimited and Nishi Nippon.

Diversification Opportunities for MTRLimited and Nishi Nippon

0.04

Correlation Coefficient

MTRLimited  Nishi Nippon

Significant diversification

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

Pair Corralation between MTRLimited and Nishi Nippon

Assuming the 90 days horizon MTR Limited is expected to under-perform the Nishi Nippon. But the stock apears to be less risky and, when comparing its historical volatility, MTR Limited is 1.47 times less risky than Nishi Nippon. The stock trades about -0.42 of its potential returns per unit of risk. The Nishi Nippon Railroad Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,320  in Nishi Nippon Railroad Co on October 23, 2024 and sell it today you would lose (10.00) from holding Nishi Nippon Railroad Co or give up 0.76% of portfolio value over 90 days.

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

MTR Limited  vs.  Nishi Nippon Railroad Co

MTR Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTR Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nishi Nippon Railroad

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nishi Nippon Railroad Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nishi Nippon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MTRLimited and Nishi Nippon

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

The idea behind MTR Limited and Nishi Nippon Railroad Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.