Correlation Between Uber Technologies and Nippon Steel

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

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

Diversification Opportunities for Uber Technologies and Nippon Steel

0.02

Correlation Coefficient

Uber Technologies  Nippon Steel

Significant diversification

The 3 months correlation between Uber and Nippon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Uber Technologies and Nippon Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel and Uber Technologies 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 Uber Technologies 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 Uber Technologies i.e., Uber Technologies and Nippon Steel go up and down completely randomly.

Pair Corralation between Uber Technologies and Nippon Steel

Assuming the 90 days trading horizon Uber Technologies is expected to under-perform the Nippon Steel. In addition to that, Uber Technologies is 1.94 times more volatile than Nippon Steel. It trades about -0.02 of its total potential returns per unit of risk. Nippon Steel is currently generating about -0.01 per unit of volatility. If you would invest  1,960  in Nippon Steel on October 6, 2024 and sell it today you would lose (42.00) from holding Nippon Steel or give up 2.14% of portfolio value over 90 days.

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

Uber Technologies  vs.  Nippon Steel

Uber Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nippon Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Uber Technologies and Nippon Steel

The main advantage of trading using opposite Uber Technologies and Nippon Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber Technologies 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 Uber Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.