Correlation Between Nippon Steel and HOCHSCHILD MINING

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

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

Diversification Opportunities for Nippon Steel and HOCHSCHILD MINING

-0.7

Correlation Coefficient

Nippon Steel  HOCHSCHILD MINING

Excellent diversification

The 3 months correlation between Nippon and HOCHSCHILD is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and HOCHSCHILD MINING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOCHSCHILD MINING 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 HOCHSCHILD MINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOCHSCHILD MINING has no effect on the direction of Nippon Steel i.e., Nippon Steel and HOCHSCHILD MINING go up and down completely randomly.

Pair Corralation between Nippon Steel and HOCHSCHILD MINING

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.47 times more return on investment than HOCHSCHILD MINING. However, Nippon Steel is 2.12 times less risky than HOCHSCHILD MINING. It trades about -0.06 of its potential returns per unit of risk. HOCHSCHILD MINING is currently generating about -0.06 per unit of risk. If you would invest  1,893  in Nippon Steel on September 21, 2024 and sell it today you would lose (84.00) from holding Nippon Steel or give up 4.44% of portfolio value over 90 days.

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

Nippon Steel  vs.  HOCHSCHILD MINING

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.

HOCHSCHILD MINING

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HOCHSCHILD MINING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, HOCHSCHILD MINING exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Steel and HOCHSCHILD MINING

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

The idea behind Nippon Steel and HOCHSCHILD MINING 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.