Correlation Between Nippon Light and TIANQI LITHIUM

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

By analyzing existing cross correlation between Nippon Light Metal and TIANQI LITHIUM H, you can compare the effects of market volatilities on Nippon Light and TIANQI LITHIUM 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 Nippon Light with a short position of TIANQI LITHIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Light and TIANQI LITHIUM.

Diversification Opportunities for Nippon Light and TIANQI LITHIUM

0.35

Correlation Coefficient

Nippon Light  TIANQI LITHIUM

Weak diversification

The 3 months correlation between Nippon and TIANQI is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and TIANQI LITHIUM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TIANQI LITHIUM H and Nippon Light 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 Nippon Light Metal are associated (or correlated) with TIANQI LITHIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TIANQI LITHIUM H has no effect on the direction of Nippon Light i.e., Nippon Light and TIANQI LITHIUM go up and down completely randomly.

Pair Corralation between Nippon Light and TIANQI LITHIUM

Assuming the 90 days horizon Nippon Light Metal is expected to generate 0.46 times more return on investment than TIANQI LITHIUM. However, Nippon Light Metal is 2.17 times less risky than TIANQI LITHIUM. It trades about 0.11 of its potential returns per unit of risk. TIANQI LITHIUM H is currently generating about 0.04 per unit of risk. If you would invest  895.00  in Nippon Light Metal on December 21, 2024 and sell it today you would earn a total of  85.00  from holding Nippon Light Metal or generate 9.5% return on investment over 90 days.

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

Nippon Light Metal  vs.  TIANQI LITHIUM H

Nippon Light Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Light Metal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nippon Light may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TIANQI LITHIUM H

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TIANQI LITHIUM H are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TIANQI LITHIUM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nippon Light and TIANQI LITHIUM

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

The idea behind Nippon Light Metal and TIANQI LITHIUM H 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.