Correlation Between NIPPON STEEL and UniCredit SpA

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

Diversification Opportunities for NIPPON STEEL and UniCredit SpA

-0.42

Correlation Coefficient

NIPPON STEEL  UniCredit SpA

Very good diversification

The 3 months correlation between NIPPON and UniCredit is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA 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 UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and UniCredit SpA go up and down completely randomly.

Pair Corralation between NIPPON STEEL and UniCredit SpA

Assuming the 90 days trading horizon NIPPON STEEL is expected to generate 22.98 times less return on investment than UniCredit SpA. In addition to that, NIPPON STEEL is 1.14 times more volatile than UniCredit SpA. It trades about 0.0 of its total potential returns per unit of risk. UniCredit SpA is currently generating about 0.08 per unit of volatility. If you would invest  3,319  in UniCredit SpA on September 19, 2024 and sell it today you would earn a total of  570.00  from holding UniCredit SpA or generate 17.17% 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.  UniCredit SpA

NIPPON STEEL SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON STEEL SPADR has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

UniCredit SpA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, UniCredit SpA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NIPPON STEEL and UniCredit SpA

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

The idea behind NIPPON STEEL SPADR and UniCredit SpA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.