Correlation Between Nippon Steel and WOLTERS KLUWER

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

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

Diversification Opportunities for Nippon Steel and WOLTERS KLUWER

-0.28

Correlation Coefficient

Nippon Steel  WOLTERS KLUWER

Very good diversification

The 3 months correlation between Nippon and WOLTERS is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and WOLTERS KLUWER ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WOLTERS KLUWER ADR 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 WOLTERS KLUWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WOLTERS KLUWER ADR has no effect on the direction of Nippon Steel i.e., Nippon Steel and WOLTERS KLUWER go up and down completely randomly.

Pair Corralation between Nippon Steel and WOLTERS KLUWER

Assuming the 90 days trading horizon Nippon Steel is expected to generate 0.87 times more return on investment than WOLTERS KLUWER. However, Nippon Steel is 1.15 times less risky than WOLTERS KLUWER. It trades about 0.19 of its potential returns per unit of risk. WOLTERS KLUWER ADR is currently generating about -0.09 per unit of risk. If you would invest  1,777  in Nippon Steel on December 23, 2024 and sell it today you would earn a total of  350.00  from holding Nippon Steel or generate 19.7% 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.  WOLTERS KLUWER ADR

Nippon Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nippon Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

WOLTERS KLUWER ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days WOLTERS KLUWER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Nippon Steel and WOLTERS KLUWER

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

The idea behind Nippon Steel and WOLTERS KLUWER ADR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.