Correlation Between Nitto Denko and Chemours

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

By analyzing existing cross correlation between Nitto Denko Corp and Chemours Co, you can compare the effects of market volatilities on Nitto Denko and Chemours 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 Chemours. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nitto Denko and Chemours.

Diversification Opportunities for Nitto Denko and Chemours

-0.23

Correlation Coefficient

Nitto Denko  Chemours

Very good diversification

The 3 months correlation between Nitto and Chemours is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nitto Denko Corp and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Corp are associated (or correlated) with Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Nitto Denko i.e., Nitto Denko and Chemours go up and down completely randomly.

Pair Corralation between Nitto Denko and Chemours

Assuming the 90 days horizon Nitto Denko Corp is expected to generate 0.35 times more return on investment than Chemours. However, Nitto Denko Corp is 2.89 times less risky than Chemours. It trades about 0.14 of its potential returns per unit of risk. Chemours Co is currently generating about -0.05 per unit of risk. If you would invest  1,582  in Nitto Denko Corp on September 19, 2024 and sell it today you would earn a total of  50.00  from holding Nitto Denko Corp or generate 3.16% return on investment over 90 days.

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

Nitto Denko Corp  vs.  Chemours Co

Nitto Denko Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chemours

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nitto Denko and Chemours

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

The idea behind Nitto Denko Corp and Chemours 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..