Correlation Between T-Mobile and NIPPON STEEL

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

By analyzing existing cross correlation between T Mobile and NIPPON STEEL SPADR, you can compare the effects of market volatilities on T-Mobile 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 T-Mobile with a short position of NIPPON STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of T-Mobile and NIPPON STEEL.

Diversification Opportunities for T-Mobile and NIPPON STEEL

0.88

Correlation Coefficient

T-Mobile  NIPPON STEEL

Very poor diversification

The 3 months correlation between T-Mobile and NIPPON is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and NIPPON STEEL SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON STEEL SPADR and T-Mobile 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 T Mobile 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 SPADR has no effect on the direction of T-Mobile i.e., T-Mobile and NIPPON STEEL go up and down completely randomly.

Pair Corralation between T-Mobile and NIPPON STEEL

Assuming the 90 days horizon T-Mobile is expected to generate 1.63 times less return on investment than NIPPON STEEL. But when comparing it to its historical volatility, T Mobile is 1.48 times less risky than NIPPON STEEL. It trades about 0.1 of its potential returns per unit of risk. NIPPON STEEL SPADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  575.00  in NIPPON STEEL SPADR on December 22, 2024 and sell it today you would earn a total of  110.00  from holding NIPPON STEEL SPADR or generate 19.13% return on investment over 90 days.

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

T Mobile  vs.  NIPPON STEEL SPADR

T Mobile

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, T-Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

NIPPON STEEL SPADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON STEEL SPADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NIPPON STEEL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T-Mobile and NIPPON STEEL

The main advantage of trading using opposite T-Mobile and NIPPON STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-Mobile 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 T Mobile and NIPPON STEEL SPADR 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.