Correlation Between NIPPON STEEL and Hyatt Hotels

Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and Hyatt Hotels 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 Hyatt Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NIPPON STEEL SPADR and Hyatt Hotels, you can compare the effects of market volatilities on NIPPON STEEL and Hyatt Hotels 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 Hyatt Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and Hyatt Hotels.

Diversification Opportunities for NIPPON STEEL and Hyatt Hotels

-0.54

Correlation Coefficient

NIPPON STEEL  Hyatt Hotels

Excellent diversification

The 3 months correlation between NIPPON and Hyatt is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and Hyatt Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyatt Hotels 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 SPADR are associated (or correlated) with Hyatt Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyatt Hotels has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and Hyatt Hotels go up and down completely randomly.

Pair Corralation between NIPPON STEEL and Hyatt Hotels

Assuming the 90 days trading horizon NIPPON STEEL SPADR is expected to generate 1.41 times more return on investment than Hyatt Hotels. However, NIPPON STEEL is 1.41 times more volatile than Hyatt Hotels. It trades about 0.11 of its potential returns per unit of risk. Hyatt Hotels is currently generating about -0.2 per unit of risk. If you would invest  575.00  in NIPPON STEEL SPADR on December 21, 2024 and sell it today you would earn a total of  105.00  from holding NIPPON STEEL SPADR or generate 18.26% return on investment over 90 days.

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

NIPPON STEEL SPADR  vs.  Hyatt Hotels

NIPPON STEEL SPADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON STEEL SPADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NIPPON STEEL reported solid returns over the last few months and may actually be approaching a breakup point.

Hyatt Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyatt Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NIPPON STEEL and Hyatt Hotels

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

The idea behind NIPPON STEEL SPADR and Hyatt Hotels 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.