Correlation Between Nuscale Power and Nidec

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

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

Diversification Opportunities for Nuscale Power and Nidec

-0.44

Correlation Coefficient

Nuscale Power  Nidec

Very good diversification

The 3 months correlation between Nuscale and Nidec is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nuscale Power Corp and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec and Nuscale Power 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 Nuscale Power Corp are associated (or correlated) with Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Nuscale Power i.e., Nuscale Power and Nidec go up and down completely randomly.

Pair Corralation between Nuscale Power and Nidec

Considering the 90-day investment horizon Nuscale Power Corp is expected to generate 3.43 times more return on investment than Nidec. However, Nuscale Power is 3.43 times more volatile than Nidec. It trades about 0.06 of its potential returns per unit of risk. Nidec is currently generating about -0.11 per unit of risk. If you would invest  1,089  in Nuscale Power Corp on September 2, 2024 and sell it today you would earn a total of  1,876  from holding Nuscale Power Corp or generate 172.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	8.27%
Values	Daily Returns

Nuscale Power Corp  vs.  Nidec

Nuscale Power Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuscale Power Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Nuscale Power reported solid returns over the last few months and may actually be approaching a breakup point.

Nidec

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nuscale Power and Nidec

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

The idea behind Nuscale Power Corp and Nidec 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.