Correlation Between Nippon Steel and Exxon Mobil

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

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

Diversification Opportunities for Nippon Steel and Exxon Mobil

0.23

Correlation Coefficient

Nippon Steel  Exxon Mobil

Modest diversification

The 3 months correlation between Nippon and Exxon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Nippon Steel i.e., Nippon Steel and Exxon Mobil go up and down completely randomly.

Pair Corralation between Nippon Steel and Exxon Mobil

Assuming the 90 days trading horizon Nippon Steel is expected to generate 1.64 times more return on investment than Exxon Mobil. However, Nippon Steel is 1.64 times more volatile than Exxon Mobil. It trades about 0.05 of its potential returns per unit of risk. Exxon Mobil is currently generating about -0.16 per unit of risk. If you would invest  1,894  in Nippon Steel on October 7, 2024 and sell it today you would earn a total of  24.00  from holding Nippon Steel or generate 1.27% return on investment over 90 days.

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

Nippon Steel  vs.  Exxon Mobil

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

Exxon Mobil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Exxon Mobil

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

The idea behind Nippon Steel and Exxon Mobil 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.