Correlation Between Nishi Nippon and Kawasaki Kisen

Can any of the company-specific risk be diversified away by investing in both Nishi Nippon and Kawasaki Kisen 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 Kawasaki Kisen 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 Kawasaki Kisen Kaisha, you can compare the effects of market volatilities on Nishi Nippon and Kawasaki Kisen 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 Kawasaki Kisen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nishi Nippon and Kawasaki Kisen.

Diversification Opportunities for Nishi Nippon and Kawasaki Kisen

0.21

Correlation Coefficient

Nishi Nippon  Kawasaki Kisen

Modest diversification

The 3 months correlation between Nishi and Kawasaki is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nishi Nippon Railroad Co and Kawasaki Kisen Kaisha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasaki Kisen Kaisha 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 Kawasaki Kisen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasaki Kisen Kaisha has no effect on the direction of Nishi Nippon i.e., Nishi Nippon and Kawasaki Kisen go up and down completely randomly.

Pair Corralation between Nishi Nippon and Kawasaki Kisen

Assuming the 90 days horizon Nishi Nippon Railroad Co is expected to generate 0.7 times more return on investment than Kawasaki Kisen. However, Nishi Nippon Railroad Co is 1.42 times less risky than Kawasaki Kisen. It trades about -0.01 of its potential returns per unit of risk. Kawasaki Kisen Kaisha is currently generating about -0.1 per unit of risk. If you would invest  1,320  in Nishi Nippon Railroad Co on October 23, 2024 and sell it today you would lose (10.00) from holding Nishi Nippon Railroad Co or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

Nishi Nippon Railroad Co  vs.  Kawasaki Kisen Kaisha

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.

Kawasaki Kisen Kaisha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawasaki Kisen Kaisha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kawasaki Kisen 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 and Kawasaki Kisen

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

The idea behind Nishi Nippon Railroad Co and Kawasaki Kisen Kaisha 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.