Correlation Between PPG Industries and Nitto Denko

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Can any of the company-specific risk be diversified away by investing in both PPG Industries and Nitto Denko 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 PPG Industries and Nitto Denko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPG Industries and Nitto Denko Corp, you can compare the effects of market volatilities on PPG Industries and Nitto Denko 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 PPG Industries with a short position of Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPG Industries and Nitto Denko.

Diversification Opportunities for PPG Industries and Nitto Denko

PPGNittoDiversified AwayPPGNittoDiversified Away100%
0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between PPG and Nitto is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding PPG Industries and Nitto Denko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko Corp and PPG Industries 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 PPG Industries are associated (or correlated) with Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko Corp has no effect on the direction of PPG Industries i.e., PPG Industries and Nitto Denko go up and down completely randomly.

Pair Corralation between PPG Industries and Nitto Denko

Considering the 90-day investment horizon PPG Industries is expected to under-perform the Nitto Denko. But the stock apears to be less risky and, when comparing its historical volatility, PPG Industries is 2.06 times less risky than Nitto Denko. The stock trades about -0.06 of its potential returns per unit of risk. The Nitto Denko Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,854  in Nitto Denko Corp on September 20, 2024 and sell it today you would lose (266.00) from holding Nitto Denko Corp or give up 14.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.47%
ValuesDaily Returns

PPG Industries  vs.  Nitto Denko Corp

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -50510
JavaScript chart by amCharts 3.21.15PPG NDEKY
       Timeline  
PPG Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PPG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PPG Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec120125130135
Nitto Denko Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nitto Denko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec14.51515.51616.51717.518

PPG Industries and Nitto Denko Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.01-1.51-1.01-0.51-0.03350.410.911.411.91 0.100.150.200.25
JavaScript chart by amCharts 3.21.15PPG NDEKY
       Returns  

Pair Trading with PPG Industries and Nitto Denko

The main advantage of trading using opposite PPG Industries and Nitto Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPG Industries position performs unexpectedly, Nitto Denko 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 Nitto Denko will offset losses from the drop in Nitto Denko's long position.
The idea behind PPG Industries and Nitto Denko Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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