Correlation Between WP Carey and Nippon Light

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

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

Diversification Opportunities for WP Carey and Nippon Light

0.65

Correlation Coefficient

WP Carey  Nippon Light

Poor diversification

The 3 months correlation between WPY and Nippon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding WP Carey and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal and WP Carey 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 WP Carey are associated (or correlated) with Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of WP Carey i.e., WP Carey and Nippon Light go up and down completely randomly.

Pair Corralation between WP Carey and Nippon Light

Assuming the 90 days trading horizon WP Carey is expected to generate 0.88 times more return on investment than Nippon Light. However, WP Carey is 1.14 times less risky than Nippon Light. It trades about 0.12 of its potential returns per unit of risk. Nippon Light Metal is currently generating about 0.1 per unit of risk. If you would invest  5,141  in WP Carey on December 20, 2024 and sell it today you would earn a total of  507.00  from holding WP Carey or generate 9.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

WP Carey  vs.  Nippon Light Metal

WP Carey

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WP Carey are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, WP Carey may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nippon Light Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Light Metal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nippon Light may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WP Carey and Nippon Light

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

The idea behind WP Carey and Nippon Light Metal 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.