Correlation Between Springwater Special and Nippon Steel

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

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

Diversification Opportunities for Springwater Special and Nippon Steel

0.25

Correlation Coefficient

Springwater Special  Nippon Steel

Modest diversification

The 3 months correlation between Springwater and Nippon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Springwater Special Situations and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp and Springwater Special 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 Springwater Special Situations 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 Corp has no effect on the direction of Springwater Special i.e., Springwater Special and Nippon Steel go up and down completely randomly.

Pair Corralation between Springwater Special and Nippon Steel

If you would invest  680.00  in Nippon Steel Corp on October 9, 2024 and sell it today you would earn a total of  12.00  from holding Nippon Steel Corp or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

Springwater Special Situations  vs.  Nippon Steel Corp

Springwater Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Springwater Special Situations has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Springwater Special is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Springwater Special and Nippon Steel

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

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.