Correlation Between NGK Insulators and Ushio

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

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

Diversification Opportunities for NGK Insulators and Ushio

0.65

Correlation Coefficient

NGK Insulators  Ushio

Poor diversification

The 3 months correlation between NGK and Ushio is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding NGK Insulators and Ushio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ushio Inc and NGK Insulators 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 NGK Insulators are associated (or correlated) with Ushio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ushio Inc has no effect on the direction of NGK Insulators i.e., NGK Insulators and Ushio go up and down completely randomly.

Pair Corralation between NGK Insulators and Ushio

Assuming the 90 days horizon NGK Insulators is expected to generate 1.54 times more return on investment than Ushio. However, NGK Insulators is 1.54 times more volatile than Ushio Inc. It trades about 0.11 of its potential returns per unit of risk. Ushio Inc is currently generating about 0.1 per unit of risk. If you would invest  1,153  in NGK Insulators on September 14, 2024 and sell it today you would earn a total of  137.00  from holding NGK Insulators or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

NGK Insulators  vs.  Ushio Inc

NGK Insulators

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NGK Insulators are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward indicators, NGK Insulators reported solid returns over the last few months and may actually be approaching a breakup point.

Ushio Inc

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with NGK Insulators and Ushio

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

The idea behind NGK Insulators and Ushio Inc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.