Correlation Between Nippon Light and Americas Gold

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

Diversification Opportunities for Nippon Light and Americas Gold

-0.31

Correlation Coefficient

Nippon Light  Americas Gold

Very good diversification

The 3 months correlation between Nippon and Americas is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Americas Gold and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Gold 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 Americas Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Gold has no effect on the direction of Nippon Light i.e., Nippon Light and Americas Gold go up and down completely randomly.

Pair Corralation between Nippon Light and Americas Gold

Assuming the 90 days horizon Nippon Light Metal is expected to under-perform the Americas Gold. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Light Metal is 4.18 times less risky than Americas Gold. The stock trades about -0.07 of its potential returns per unit of risk. The Americas Gold and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Americas Gold and on October 10, 2024 and sell it today you would earn a total of  2.00  from holding Americas Gold and or generate 5.41% return on investment over 90 days.

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

Nippon Light Metal  vs.  Americas Gold and

Nippon Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Americas Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Americas Gold and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Americas Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Light and Americas Gold

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

The idea behind Nippon Light Metal and Americas Gold and 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.