Correlation Between Nippon Steel and AP Møller

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

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

Diversification Opportunities for Nippon Steel and AP Møller

-0.04

Correlation Coefficient

Nippon Steel  AP Møller

Good diversification

The 3 months correlation between Nippon and DP4B is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Nippon Steel i.e., Nippon Steel and AP Møller go up and down completely randomly.

Pair Corralation between Nippon Steel and AP Møller

Assuming the 90 days trading horizon Nippon Steel is expected to generate 286.69 times less return on investment than AP Møller. But when comparing it to its historical volatility, Nippon Steel is 1.51 times less risky than AP Møller. It trades about 0.0 of its potential returns per unit of risk. AP Mller is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  135,450  in AP Mller on October 8, 2024 and sell it today you would earn a total of  30,800  from holding AP Mller or generate 22.74% 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.  AP Mller

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

AP Møller

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Steel and AP Møller

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

The idea behind Nippon Steel and AP Mller 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.