Correlation Between Nishi-Nippon Railroad and EMPLOYERS HLDGS

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

Diversification Opportunities for Nishi-Nippon Railroad and EMPLOYERS HLDGS

0.22

Correlation Coefficient

Nishi-Nippon Railroad  EMPLOYERS HLDGS

Modest diversification

The 3 months correlation between Nishi-Nippon and EMPLOYERS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nishi Nippon Railroad Co and EMPLOYERS HLDGS DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPLOYERS HLDGS DL has no effect on the direction of Nishi-Nippon Railroad i.e., Nishi-Nippon Railroad and EMPLOYERS HLDGS go up and down completely randomly.

Pair Corralation between Nishi-Nippon Railroad and EMPLOYERS HLDGS

Assuming the 90 days horizon Nishi Nippon Railroad Co is expected to generate 1.78 times more return on investment than EMPLOYERS HLDGS. However, Nishi-Nippon Railroad is 1.78 times more volatile than EMPLOYERS HLDGS DL. It trades about -0.04 of its potential returns per unit of risk. EMPLOYERS HLDGS DL is currently generating about -0.24 per unit of risk. If you would invest  1,400  in Nishi Nippon Railroad Co on October 9, 2024 and sell it today you would lose (20.00) from holding Nishi Nippon Railroad Co or give up 1.43% of portfolio value over 90 days.

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

Nishi Nippon Railroad Co  vs.  EMPLOYERS HLDGS DL

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.

EMPLOYERS HLDGS DL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMPLOYERS HLDGS DL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMPLOYERS HLDGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nishi-Nippon Railroad and EMPLOYERS HLDGS

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

The idea behind Nishi Nippon Railroad Co and EMPLOYERS HLDGS DL 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.