Correlation Between Nippon Steel and Ferrexpo PLC

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

Diversification Opportunities for Nippon Steel and Ferrexpo PLC

-0.42

Correlation Coefficient

Nippon Steel  Ferrexpo PLC

Very good diversification

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

Pair Corralation between Nippon Steel and Ferrexpo PLC

Assuming the 90 days horizon Nippon Steel is expected to generate 52.69 times less return on investment than Ferrexpo PLC. But when comparing it to its historical volatility, Nippon Steel Corp is 3.05 times less risky than Ferrexpo PLC. It trades about 0.0 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  111.00  in Ferrexpo PLC on September 30, 2024 and sell it today you would earn a total of  12.00  from holding Ferrexpo PLC or generate 10.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.47%
Values	Daily Returns

Nippon Steel Corp  vs.  Ferrexpo PLC

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ferrexpo PLC

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Nippon Steel and Ferrexpo PLC

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

The idea behind Nippon Steel Corp and Ferrexpo PLC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.