Correlation Between Nitto Denko and Minerals Technologies

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

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

Diversification Opportunities for Nitto Denko and Minerals Technologies

-0.44

Correlation Coefficient

Nitto Denko  Minerals Technologies

Very good diversification

The 3 months correlation between Nitto and Minerals is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nitto Denko and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies and Nitto Denko 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 Nitto Denko are associated (or correlated) with Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Nitto Denko i.e., Nitto Denko and Minerals Technologies go up and down completely randomly.

Pair Corralation between Nitto Denko and Minerals Technologies

Assuming the 90 days horizon Nitto Denko is expected to generate 0.91 times more return on investment than Minerals Technologies. However, Nitto Denko is 1.1 times less risky than Minerals Technologies. It trades about 0.01 of its potential returns per unit of risk. Minerals Technologies is currently generating about -0.01 per unit of risk. If you would invest  1,684  in Nitto Denko on October 21, 2024 and sell it today you would earn a total of  11.00  from holding Nitto Denko or generate 0.65% return on investment over 90 days.

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

Nitto Denko  vs.  Minerals Technologies

Nitto Denko

Risk-Adjusted Performance

1 of 100

Weak

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

Minerals Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Minerals Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nitto Denko and Minerals Technologies

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

The idea behind Nitto Denko and Minerals Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.