Correlation Between Stag Industrial and Nippon Steel

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

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

Diversification Opportunities for Stag Industrial and Nippon Steel

0.61

Correlation Coefficient

Stag Industrial  Nippon Steel

Poor diversification

The 3 months correlation between Stag and Nippon is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Stag Industrial and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Stag Industrial 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 Stag Industrial 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 Stag Industrial i.e., Stag Industrial and Nippon Steel go up and down completely randomly.

Pair Corralation between Stag Industrial and Nippon Steel

Assuming the 90 days trading horizon Stag Industrial is expected to generate 7.73 times less return on investment than Nippon Steel. But when comparing it to its historical volatility, Stag Industrial is 2.41 times less risky than Nippon Steel. It trades about 0.04 of its potential returns per unit of risk. Nippon Steel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,748  in Nippon Steel on December 21, 2024 and sell it today you would earn a total of  328.00  from holding Nippon Steel or generate 18.76% return on investment over 90 days.

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

Stag Industrial  vs.  Nippon Steel

Stag Industrial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stag Industrial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Stag Industrial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nippon Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel are ranked lower than 10 (%) 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 Stag Industrial and Nippon Steel

The main advantage of trading using opposite Stag Industrial and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stag Industrial 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 Stag Industrial 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.