Correlation Between Nippon Steel and Firan Technology

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

By analyzing existing cross correlation between Nippon Steel and Firan Technology Group, you can compare the effects of market volatilities on Nippon Steel and Firan Technology 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 Nippon Steel with a short position of Firan Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Firan Technology.

Diversification Opportunities for Nippon Steel and Firan Technology

0.05

Correlation Coefficient

Nippon Steel  Firan Technology

Significant diversification

The 3 months correlation between Nippon and Firan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology and Nippon Steel 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 Nippon Steel are associated (or correlated) with Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of Nippon Steel i.e., Nippon Steel and Firan Technology go up and down completely randomly.

Pair Corralation between Nippon Steel and Firan Technology

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.77 times more return on investment than Firan Technology. However, Nippon Steel is 1.29 times less risky than Firan Technology. It trades about 0.19 of its potential returns per unit of risk. Firan Technology Group is currently generating about -0.07 per unit of risk. If you would invest  1,777  in Nippon Steel on December 21, 2024 and sell it today you would earn a total of  335.00  from holding Nippon Steel or generate 18.85% return on investment over 90 days.

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

Nippon Steel  vs.  Firan Technology Group

Nippon Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Nippon Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Firan Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firan Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Nippon Steel and Firan Technology

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

The idea behind Nippon Steel and Firan Technology Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.