Correlation Between Nippon Steel and GUARDANT HEALTH

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

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

Diversification Opportunities for Nippon Steel and GUARDANT HEALTH

-0.1

Correlation Coefficient

Nippon Steel  GUARDANT HEALTH

Good diversification

The 3 months correlation between Nippon and GUARDANT is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL 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 GUARDANT HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUARDANT HEALTH CL has no effect on the direction of Nippon Steel i.e., Nippon Steel and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between Nippon Steel and GUARDANT HEALTH

Assuming the 90 days trading horizon Nippon Steel is expected to under-perform the GUARDANT HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Steel is 3.36 times less risky than GUARDANT HEALTH. The stock trades about -0.15 of its potential returns per unit of risk. The GUARDANT HEALTH CL is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,891  in GUARDANT HEALTH CL on September 22, 2024 and sell it today you would earn a total of  205.00  from holding GUARDANT HEALTH CL or generate 7.09% return on investment over 90 days.

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

Nippon Steel  vs.  GUARDANT HEALTH CL

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 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.

GUARDANT HEALTH CL

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Nippon Steel and GUARDANT HEALTH

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

The idea behind Nippon Steel and GUARDANT HEALTH CL 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.