Correlation Between Nippon Steel and Bangkok Dusit

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

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

Diversification Opportunities for Nippon Steel and Bangkok Dusit

0.18

Correlation Coefficient

Nippon Steel  Bangkok Dusit

Average diversification

The 3 months correlation between Nippon and Bangkok is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel Corp and Bangkok Dusit Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Dusit Medical 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 Corp are associated (or correlated) with Bangkok Dusit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Dusit Medical has no effect on the direction of Nippon Steel i.e., Nippon Steel and Bangkok Dusit go up and down completely randomly.

Pair Corralation between Nippon Steel and Bangkok Dusit

Assuming the 90 days horizon Nippon Steel Corp is expected to generate 2.44 times more return on investment than Bangkok Dusit. However, Nippon Steel is 2.44 times more volatile than Bangkok Dusit Medical. It trades about 0.25 of its potential returns per unit of risk. Bangkok Dusit Medical is currently generating about 0.04 per unit of risk. If you would invest  646.00  in Nippon Steel Corp on December 20, 2024 and sell it today you would earn a total of  138.00  from holding Nippon Steel Corp or generate 21.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Nippon Steel Corp  vs.  Bangkok Dusit Medical

Nippon Steel Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Nippon Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Bangkok Dusit Medical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Dusit Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Bangkok Dusit is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nippon Steel and Bangkok Dusit

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

The idea behind Nippon Steel Corp and Bangkok Dusit Medical 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.