Correlation Between Nippon Steel and ALLSTATE

Can any of the company-specific risk be diversified away by investing in both Nippon Steel and ALLSTATE 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 ALLSTATE 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 ALLSTATE P 328, you can compare the effects of market volatilities on Nippon Steel and ALLSTATE 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 ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and ALLSTATE.

Diversification Opportunities for Nippon Steel and ALLSTATE

-0.09

Correlation Coefficient

Nippon Steel  ALLSTATE

Good diversification

The 3 months correlation between Nippon and ALLSTATE is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel Corp and ALLSTATE P 328 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 328 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 ALLSTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLSTATE P 328 has no effect on the direction of Nippon Steel i.e., Nippon Steel and ALLSTATE go up and down completely randomly.

Pair Corralation between Nippon Steel and ALLSTATE

Assuming the 90 days horizon Nippon Steel Corp is expected to generate 5.28 times more return on investment than ALLSTATE. However, Nippon Steel is 5.28 times more volatile than ALLSTATE P 328. It trades about 0.21 of its potential returns per unit of risk. ALLSTATE P 328 is currently generating about -0.02 per unit of risk. If you would invest  652.00  in Nippon Steel Corp on December 26, 2024 and sell it today you would earn a total of  118.00  from holding Nippon Steel Corp or generate 18.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

Nippon Steel Corp  vs.  ALLSTATE P 328

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 16 (%) 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.

ALLSTATE P 328

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALLSTATE P 328 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nippon Steel and ALLSTATE

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

The idea behind Nippon Steel Corp and ALLSTATE P 328 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.