Correlation Between Nippon Steel and DONGJIANG ENVIRONMENTAL

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

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

Diversification Opportunities for Nippon Steel and DONGJIANG ENVIRONMENTAL

0.19

Correlation Coefficient

Nippon Steel  DONGJIANG ENVIRONMENTAL

Average diversification

The 3 months correlation between Nippon and DONGJIANG is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and DONGJIANG ENVIRONMENTAL H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DONGJIANG ENVIRONMENTAL 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 DONGJIANG ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DONGJIANG ENVIRONMENTAL has no effect on the direction of Nippon Steel i.e., Nippon Steel and DONGJIANG ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Nippon Steel and DONGJIANG ENVIRONMENTAL

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.19 times more return on investment than DONGJIANG ENVIRONMENTAL. However, Nippon Steel is 5.31 times less risky than DONGJIANG ENVIRONMENTAL. It trades about 0.19 of its potential returns per unit of risk. DONGJIANG ENVIRONMENTAL H is currently generating about 0.03 per unit of risk. If you would invest  1,777  in Nippon Steel on December 22, 2024 and sell it today you would earn a total of  339.00  from holding Nippon Steel or generate 19.08% 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.  DONGJIANG ENVIRONMENTAL H

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.

DONGJIANG ENVIRONMENTAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DONGJIANG ENVIRONMENTAL H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DONGJIANG ENVIRONMENTAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Steel and DONGJIANG ENVIRONMENTAL

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

The idea behind Nippon Steel and DONGJIANG ENVIRONMENTAL H 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.