Correlation Between Nippon Steel and Phillips
Can any of the company-specific risk be diversified away by investing in both Nippon Steel and Phillips 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 Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Steel and Phillips 66, you can compare the effects of market volatilities on Nippon Steel and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Phillips.
Diversification Opportunities for Nippon Steel and Phillips
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nippon and Phillips is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Nippon Steel i.e., Nippon Steel and Phillips go up and down completely randomly.
Pair Corralation between Nippon Steel and Phillips
Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.93 times more return on investment than Phillips. However, Nippon Steel is 1.08 times less risky than Phillips. It trades about 0.13 of its potential returns per unit of risk. Phillips 66 is currently generating about -0.01 per unit of risk. If you would invest 1,851 in Nippon Steel on November 15, 2024 and sell it today you would earn a total of 251.00 from holding Nippon Steel or generate 13.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.33% |
Values | Daily Returns |
Nippon Steel vs. Phillips 66
Performance |
Timeline |
Nippon Steel |
Phillips 66 |
Nippon Steel and Phillips Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nippon Steel and Phillips
The main advantage of trading using opposite Nippon Steel and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Steel position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.Nippon Steel vs. GREENX METALS LTD | ||
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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