Correlation Between Independence Realty and Nomura Holdings

Can any of the company-specific risk be diversified away by investing in both Independence Realty and Nomura Holdings 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 Independence Realty and Nomura Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Independence Realty Trust and Nomura Holdings ADR, you can compare the effects of market volatilities on Independence Realty and Nomura Holdings 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 Independence Realty with a short position of Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independence Realty and Nomura Holdings.

Diversification Opportunities for Independence Realty and Nomura Holdings

0.83

Correlation Coefficient

Independence Realty  Nomura Holdings

Very poor diversification

The 3 months correlation between Independence and Nomura is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR and Independence Realty 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 Independence Realty Trust are associated (or correlated) with Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of Independence Realty i.e., Independence Realty and Nomura Holdings go up and down completely randomly.

Pair Corralation between Independence Realty and Nomura Holdings

Considering the 90-day investment horizon Independence Realty is expected to generate 7.2 times less return on investment than Nomura Holdings. But when comparing it to its historical volatility, Independence Realty Trust is 1.18 times less risky than Nomura Holdings. It trades about 0.03 of its potential returns per unit of risk. Nomura Holdings ADR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  506.00  in Nomura Holdings ADR on September 23, 2024 and sell it today you would earn a total of  67.00  from holding Nomura Holdings ADR or generate 13.24% return on investment over 90 days.

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

Independence Realty Trust  vs.  Nomura Holdings ADR

Independence Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nomura Holdings ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Nomura Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Independence Realty and Nomura Holdings

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

The idea behind Independence Realty Trust and Nomura Holdings ADR 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.