Correlation Between Nishi-Nippon Railroad and Global Ship

Can any of the company-specific risk be diversified away by investing in both Nishi-Nippon Railroad and Global Ship 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 Nishi-Nippon Railroad and Global Ship into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nishi Nippon Railroad Co and Global Ship Lease, you can compare the effects of market volatilities on Nishi-Nippon Railroad and Global Ship 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 Nishi-Nippon Railroad with a short position of Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nishi-Nippon Railroad and Global Ship.

Diversification Opportunities for Nishi-Nippon Railroad and Global Ship

0.13

Correlation Coefficient

Nishi-Nippon Railroad  Global Ship

Average diversification

The 3 months correlation between Nishi-Nippon and Global is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nishi Nippon Railroad Co and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease and Nishi-Nippon Railroad 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 Nishi Nippon Railroad Co are associated (or correlated) with Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Nishi-Nippon Railroad i.e., Nishi-Nippon Railroad and Global Ship go up and down completely randomly.

Pair Corralation between Nishi-Nippon Railroad and Global Ship

Assuming the 90 days horizon Nishi Nippon Railroad Co is expected to generate 1.77 times more return on investment than Global Ship. However, Nishi-Nippon Railroad is 1.77 times more volatile than Global Ship Lease. It trades about 0.05 of its potential returns per unit of risk. Global Ship Lease is currently generating about 0.06 per unit of risk. If you would invest  1,003  in Nishi Nippon Railroad Co on October 9, 2024 and sell it today you would earn a total of  377.00  from holding Nishi Nippon Railroad Co or generate 37.59% return on investment over 90 days.

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

Nishi Nippon Railroad Co  vs.  Global Ship Lease

Nishi Nippon Railroad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nishi Nippon Railroad Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nishi-Nippon Railroad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nishi-Nippon Railroad and Global Ship

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

The idea behind Nishi Nippon Railroad Co and Global Ship Lease 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.