Correlation Between Nippon Steel and Uber Technologies

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

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

Diversification Opportunities for Nippon Steel and Uber Technologies

0.02

Correlation Coefficient

Nippon Steel  Uber Technologies

Significant diversification

The 3 months correlation between Nippon and Uber is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Nippon Steel i.e., Nippon Steel and Uber Technologies go up and down completely randomly.

Pair Corralation between Nippon Steel and Uber Technologies

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.59 times more return on investment than Uber Technologies. However, Nippon Steel is 1.7 times less risky than Uber Technologies. It trades about 0.08 of its potential returns per unit of risk. Uber Technologies is currently generating about -0.05 per unit of risk. If you would invest  1,832  in Nippon Steel on October 6, 2024 and sell it today you would earn a total of  86.00  from holding Nippon Steel or generate 4.69% return on investment over 90 days.

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

Nippon Steel  vs.  Uber Technologies

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

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Uber Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nippon Steel and Uber Technologies

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

The idea behind Nippon Steel and Uber Technologies 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.