Correlation Between Nippon Steel and Hermès International

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

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

Diversification Opportunities for Nippon Steel and Hermès International

0.58

Correlation Coefficient

Nippon Steel  Hermès International

Very weak diversification

The 3 months correlation between Nippon and Hermès is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit 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 Hermès International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of Nippon Steel i.e., Nippon Steel and Hermès International go up and down completely randomly.

Pair Corralation between Nippon Steel and Hermès International

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.96 times more return on investment than Hermès International. However, Nippon Steel is 1.04 times less risky than Hermès International. It trades about 0.19 of its potential returns per unit of risk. Herms International Socit is currently generating about 0.07 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	Weak
Accuracy	100.0%
Values	Daily Returns

Nippon Steel  vs.  Herms International Socit

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 weak basic indicators, Nippon Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Herms International Socit

Risk-Adjusted Performance

Modest

Over the last 90 days Herms International Socit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Hermès International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nippon Steel and Hermès International

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

The idea behind Nippon Steel and Herms International Socit 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.