Correlation Between Nippon Light and Deutsche Pfandbriefbank

Can any of the company-specific risk be diversified away by investing in both Nippon Light and Deutsche Pfandbriefbank 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 Deutsche Pfandbriefbank 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 Deutsche Pfandbriefbank AG, you can compare the effects of market volatilities on Nippon Light and Deutsche Pfandbriefbank 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 Deutsche Pfandbriefbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Light and Deutsche Pfandbriefbank.

Diversification Opportunities for Nippon Light and Deutsche Pfandbriefbank

0.82

Correlation Coefficient

Nippon Light  Deutsche Pfandbriefbank

Very poor diversification

The 3 months correlation between Nippon and Deutsche is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Deutsche Pfandbriefbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Pfandbriefbank 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 Deutsche Pfandbriefbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Pfandbriefbank has no effect on the direction of Nippon Light i.e., Nippon Light and Deutsche Pfandbriefbank go up and down completely randomly.

Pair Corralation between Nippon Light and Deutsche Pfandbriefbank

Assuming the 90 days horizon Nippon Light is expected to generate 3.62 times less return on investment than Deutsche Pfandbriefbank. But when comparing it to its historical volatility, Nippon Light Metal is 1.98 times less risky than Deutsche Pfandbriefbank. It trades about 0.07 of its potential returns per unit of risk. Deutsche Pfandbriefbank AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  477.00  in Deutsche Pfandbriefbank AG on December 24, 2024 and sell it today you would earn a total of  110.00  from holding Deutsche Pfandbriefbank AG or generate 23.06% return on investment over 90 days.

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

Nippon Light Metal  vs.  Deutsche Pfandbriefbank AG

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 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nippon Light may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Deutsche Pfandbriefbank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Pfandbriefbank AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Deutsche Pfandbriefbank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Light and Deutsche Pfandbriefbank

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

The idea behind Nippon Light Metal and Deutsche Pfandbriefbank AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.