Correlation Between Nishi Nippon and UNICREDIT SPA

Can any of the company-specific risk be diversified away by investing in both Nishi Nippon and UNICREDIT SPA 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 and UNICREDIT SPA 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 UNICREDIT SPA ADR, you can compare the effects of market volatilities on Nishi Nippon and UNICREDIT SPA 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 with a short position of UNICREDIT SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nishi Nippon and UNICREDIT SPA.

Diversification Opportunities for Nishi Nippon and UNICREDIT SPA

-0.59

Correlation Coefficient

Nishi Nippon  UNICREDIT SPA

Excellent diversification

The 3 months correlation between Nishi and UNICREDIT is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nishi Nippon Railroad Co and UNICREDIT SPA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICREDIT SPA ADR and Nishi Nippon 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 UNICREDIT SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICREDIT SPA ADR has no effect on the direction of Nishi Nippon i.e., Nishi Nippon and UNICREDIT SPA go up and down completely randomly.

Pair Corralation between Nishi Nippon and UNICREDIT SPA

Assuming the 90 days horizon Nishi Nippon is expected to generate 5.06 times less return on investment than UNICREDIT SPA. But when comparing it to its historical volatility, Nishi Nippon Railroad Co is 1.05 times less risky than UNICREDIT SPA. It trades about 0.02 of its potential returns per unit of risk. UNICREDIT SPA ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,949  in UNICREDIT SPA ADR on October 26, 2024 and sell it today you would earn a total of  151.00  from holding UNICREDIT SPA ADR or generate 7.75% return on investment over 90 days.

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

Nishi Nippon Railroad Co  vs.  UNICREDIT SPA ADR

Nishi Nippon Railroad

Risk-Adjusted Performance

1 of 100

Weak

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

UNICREDIT SPA ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, UNICREDIT SPA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nishi Nippon and UNICREDIT SPA

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

The idea behind Nishi Nippon Railroad Co and UNICREDIT SPA ADR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.