Correlation Between NISSAN CHEMICAL and Northern Star

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

By analyzing existing cross correlation between NISSAN CHEMICAL IND and Northern Star Resources, you can compare the effects of market volatilities on NISSAN CHEMICAL and Northern Star 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 CHEMICAL with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of NISSAN CHEMICAL and Northern Star.

Diversification Opportunities for NISSAN CHEMICAL and Northern Star

0.3

Correlation Coefficient

NISSAN CHEMICAL  Northern Star

Weak diversification

The 3 months correlation between NISSAN and Northern is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding NISSAN CHEMICAL IND and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources and NISSAN CHEMICAL 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 CHEMICAL IND are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of NISSAN CHEMICAL i.e., NISSAN CHEMICAL and Northern Star go up and down completely randomly.

Pair Corralation between NISSAN CHEMICAL and Northern Star

Assuming the 90 days trading horizon NISSAN CHEMICAL IND is expected to generate 0.71 times more return on investment than Northern Star. However, NISSAN CHEMICAL IND is 1.4 times less risky than Northern Star. It trades about -0.37 of its potential returns per unit of risk. Northern Star Resources is currently generating about -0.36 per unit of risk. If you would invest  3,360  in NISSAN CHEMICAL IND on September 23, 2024 and sell it today you would lose (380.00) from holding NISSAN CHEMICAL IND or give up 11.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NISSAN CHEMICAL IND  vs.  Northern Star Resources

NISSAN CHEMICAL IND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISSAN CHEMICAL IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Northern Star Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Star Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Northern Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NISSAN CHEMICAL and Northern Star

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

The idea behind NISSAN CHEMICAL IND and Northern Star Resources 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.