Correlation Between NIPPON STEEL and Omeros

Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and Omeros 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 Omeros 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 Omeros, you can compare the effects of market volatilities on NIPPON STEEL and Omeros 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 Omeros. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and Omeros.

Diversification Opportunities for NIPPON STEEL and Omeros

0.08

Correlation Coefficient

NIPPON STEEL  Omeros

Significant diversification

The 3 months correlation between NIPPON and Omeros is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and Omeros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omeros 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 Omeros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omeros has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and Omeros go up and down completely randomly.

Pair Corralation between NIPPON STEEL and Omeros

Assuming the 90 days trading horizon NIPPON STEEL is expected to generate 10.44 times less return on investment than Omeros. But when comparing it to its historical volatility, NIPPON STEEL SPADR is 12.01 times less risky than Omeros. It trades about 0.11 of its potential returns per unit of risk. Omeros is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  638.00  in Omeros on September 16, 2024 and sell it today you would earn a total of  81.00  from holding Omeros or generate 12.7% return on investment over 90 days.

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

NIPPON STEEL SPADR  vs.  Omeros

NIPPON STEEL SPADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON STEEL SPADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NIPPON STEEL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Omeros

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Omeros are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Omeros reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIPPON STEEL and Omeros

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

The idea behind NIPPON STEEL SPADR and Omeros 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.