Correlation Between Nippon Steel and PENN NATL

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

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

Diversification Opportunities for Nippon Steel and PENN NATL

-0.11

Correlation Coefficient

Nippon Steel  PENN NATL

Good diversification

The 3 months correlation between Nippon and PENN is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Nippon Steel i.e., Nippon Steel and PENN NATL go up and down completely randomly.

Pair Corralation between Nippon Steel and PENN NATL

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.58 times more return on investment than PENN NATL. However, Nippon Steel is 1.74 times less risky than PENN NATL. It trades about 0.02 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.01 per unit of risk. If you would invest  1,789  in Nippon Steel on October 5, 2024 and sell it today you would earn a total of  120.00  from holding Nippon Steel or generate 6.71% 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.  PENN NATL GAMING

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

PENN NATL GAMING

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Steel and PENN NATL

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

The idea behind Nippon Steel and PENN NATL GAMING 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.