Correlation Between Nishi-Nippon Railroad and ÖKOWORLD

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

Diversification Opportunities for Nishi-Nippon Railroad and ÖKOWORLD

-0.47

Correlation Coefficient

Nishi-Nippon Railroad  ÖKOWORLD

Very good diversification

The 3 months correlation between Nishi-Nippon and ÖKOWORLD is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nishi Nippon Railroad Co and KOWORLD AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOWORLD AG 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 ÖKOWORLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOWORLD AG has no effect on the direction of Nishi-Nippon Railroad i.e., Nishi-Nippon Railroad and ÖKOWORLD go up and down completely randomly.

Pair Corralation between Nishi-Nippon Railroad and ÖKOWORLD

Assuming the 90 days horizon Nishi Nippon Railroad Co is expected to under-perform the ÖKOWORLD. But the stock apears to be less risky and, when comparing its historical volatility, Nishi Nippon Railroad Co is 1.56 times less risky than ÖKOWORLD. The stock trades about -0.01 of its potential returns per unit of risk. The KOWORLD AG is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,993  in KOWORLD AG on October 9, 2024 and sell it today you would lose (193.00) from holding KOWORLD AG or give up 6.45% of portfolio value 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.  KOWORLD AG

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.

KOWORLD AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nishi-Nippon Railroad and ÖKOWORLD

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

The idea behind Nishi Nippon Railroad Co and KOWORLD AG 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.