Correlation Between Nippon Steel and Americas Gold

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

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

Diversification Opportunities for Nippon Steel and Americas Gold

-0.62

Correlation Coefficient

Nippon Steel  Americas Gold

Excellent diversification

The 3 months correlation between Nippon and Americas is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Americas Gold and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Gold 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 Americas Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Gold has no effect on the direction of Nippon Steel i.e., Nippon Steel and Americas Gold go up and down completely randomly.

Pair Corralation between Nippon Steel and Americas Gold

Assuming the 90 days trading horizon Nippon Steel is expected to generate 2.07 times less return on investment than Americas Gold. But when comparing it to its historical volatility, Nippon Steel is 2.33 times less risky than Americas Gold. It trades about 0.06 of its potential returns per unit of risk. Americas Gold and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Americas Gold and on October 9, 2024 and sell it today you would earn a total of  1.00  from holding Americas Gold and or generate 2.63% return on investment over 90 days.

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

Nippon Steel  vs.  Americas Gold and

Nippon Steel

Risk-Adjusted Performance

0 of 100

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

Americas Gold

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Americas Gold and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Americas Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Steel and Americas Gold

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

The idea behind Nippon Steel and Americas Gold and 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.