Correlation Between Kawasaki Kisen and Nippon Yusen

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

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

Diversification Opportunities for Kawasaki Kisen and Nippon Yusen

0.63

Correlation Coefficient

Kawasaki Kisen  Nippon Yusen

Poor diversification

The 3 months correlation between Kawasaki and Nippon is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kawasaki Kisen Kaisha and Nippon Yusen Kabushiki in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Yusen Kabushiki and Kawasaki Kisen 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 Kawasaki Kisen Kaisha are associated (or correlated) with Nippon Yusen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Yusen Kabushiki has no effect on the direction of Kawasaki Kisen i.e., Kawasaki Kisen and Nippon Yusen go up and down completely randomly.

Pair Corralation between Kawasaki Kisen and Nippon Yusen

Assuming the 90 days trading horizon Kawasaki Kisen Kaisha is expected to generate 1.03 times more return on investment than Nippon Yusen. However, Kawasaki Kisen is 1.03 times more volatile than Nippon Yusen Kabushiki. It trades about 0.01 of its potential returns per unit of risk. Nippon Yusen Kabushiki is currently generating about 0.0 per unit of risk. If you would invest  1,308  in Kawasaki Kisen Kaisha on September 23, 2024 and sell it today you would lose (3.00) from holding Kawasaki Kisen Kaisha or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Kawasaki Kisen Kaisha  vs.  Nippon Yusen Kabushiki

Kawasaki Kisen Kaisha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kawasaki Kisen Kaisha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kawasaki Kisen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nippon Yusen Kabushiki

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Yusen Kabushiki has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Nippon Yusen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kawasaki Kisen and Nippon Yusen

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

The idea behind Kawasaki Kisen Kaisha and Nippon Yusen Kabushiki 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.