Correlation Between Molson Coors and Nippon Steel

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

By analyzing existing cross correlation between Molson Coors Beverage and Nippon Steel, you can compare the effects of market volatilities on Molson Coors and Nippon Steel 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 Molson Coors with a short position of Nippon Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Molson Coors and Nippon Steel.

Diversification Opportunities for Molson Coors and Nippon Steel

0.2

Correlation Coefficient

Molson Coors  Nippon Steel

Modest diversification

The 3 months correlation between Molson and Nippon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Beverage and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Molson Coors 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 Molson Coors Beverage are associated (or correlated) with Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel has no effect on the direction of Molson Coors i.e., Molson Coors and Nippon Steel go up and down completely randomly.

Pair Corralation between Molson Coors and Nippon Steel

Assuming the 90 days trading horizon Molson Coors Beverage is expected to under-perform the Nippon Steel. But the stock apears to be less risky and, when comparing its historical volatility, Molson Coors Beverage is 1.06 times less risky than Nippon Steel. The stock trades about -0.05 of its potential returns per unit of risk. The Nippon Steel is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,748  in Nippon Steel on December 23, 2024 and sell it today you would earn a total of  432.00  from holding Nippon Steel or generate 24.71% return on investment over 90 days.

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

Molson Coors Beverage  vs.  Nippon Steel

Molson Coors Beverage

Risk-Adjusted Performance

Very Weak

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

Nippon Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nippon Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Molson Coors and Nippon Steel

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

The idea behind Molson Coors Beverage and Nippon Steel 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.