Correlation Between Nippon Steel and CaixaBank

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

By analyzing existing cross correlation between Nippon Steel and CaixaBank SA, you can compare the effects of market volatilities on Nippon Steel and CaixaBank 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 CaixaBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and CaixaBank.

Diversification Opportunities for Nippon Steel and CaixaBank

-0.22

Correlation Coefficient

Nippon Steel  CaixaBank

Very good diversification

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

Pair Corralation between Nippon Steel and CaixaBank

Assuming the 90 days trading horizon Nippon Steel is expected to under-perform the CaixaBank. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Steel is 1.1 times less risky than CaixaBank. The stock trades about -0.01 of its potential returns per unit of risk. The CaixaBank SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  518.00  in CaixaBank SA on October 10, 2024 and sell it today you would earn a total of  17.00  from holding CaixaBank SA or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Nippon Steel  vs.  CaixaBank SA

Nippon Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nippon Steel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CaixaBank SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CaixaBank SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, CaixaBank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nippon Steel and CaixaBank

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

The idea behind Nippon Steel and CaixaBank SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.