Correlation Between Nissan and Subaru Corp

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

By analyzing existing cross correlation between Nissan Motor Co and Subaru Corp ADR, you can compare the effects of market volatilities on Nissan and Subaru Corp 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 Nissan with a short position of Subaru Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nissan and Subaru Corp.

Diversification Opportunities for Nissan and Subaru Corp

0.0

Correlation Coefficient

Nissan  Subaru Corp

Pay attention - limited upside

The 3 months correlation between Nissan and Subaru is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nissan Motor Co and Subaru Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subaru Corp ADR and Nissan 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 Nissan Motor Co are associated (or correlated) with Subaru Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subaru Corp ADR has no effect on the direction of Nissan i.e., Nissan and Subaru Corp go up and down completely randomly.

Pair Corralation between Nissan and Subaru Corp

If you would invest  867.00  in Subaru Corp ADR on December 2, 2024 and sell it today you would earn a total of  53.00  from holding Subaru Corp ADR or generate 6.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Nissan Motor Co  vs.  Subaru Corp ADR

Nissan Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nissan Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nissan is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Subaru Corp ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Subaru Corp ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Subaru Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nissan and Subaru Corp

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

The idea behind Nissan Motor Co and Subaru Corp ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.