Correlation Between Nippon Steel and Apple

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

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

Diversification Opportunities for Nippon Steel and Apple

-0.1

Correlation Coefficient

Nippon Steel  Apple

Good diversification

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

Pair Corralation between Nippon Steel and Apple

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.86 times more return on investment than Apple. However, Nippon Steel is 1.16 times less risky than Apple. It trades about 0.15 of its potential returns per unit of risk. Apple Inc is currently generating about -0.06 per unit of risk. If you would invest  1,932  in Nippon Steel on December 5, 2024 and sell it today you would earn a total of  194.00  from holding Nippon Steel or generate 10.04% 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.  Apple Inc

Nippon Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 9 (%) 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.

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Apple is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nippon Steel and Apple

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

The idea behind Nippon Steel and Apple Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.