Correlation Between Nihon Kohden and Boston Scientific

Can any of the company-specific risk be diversified away by investing in both Nihon Kohden and Boston Scientific 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 Nihon Kohden and Boston Scientific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nihon Kohden Corp and Boston Scientific Corp, you can compare the effects of market volatilities on Nihon Kohden and Boston Scientific 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 Nihon Kohden with a short position of Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nihon Kohden and Boston Scientific.

Diversification Opportunities for Nihon Kohden and Boston Scientific

-0.42

Correlation Coefficient

Nihon Kohden  Boston Scientific

Very good diversification

The 3 months correlation between Nihon and Boston is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nihon Kohden Corp and Boston Scientific Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific Corp and Nihon Kohden 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 Nihon Kohden Corp are associated (or correlated) with Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific Corp has no effect on the direction of Nihon Kohden i.e., Nihon Kohden and Boston Scientific go up and down completely randomly.

Pair Corralation between Nihon Kohden and Boston Scientific

Assuming the 90 days horizon Nihon Kohden Corp is expected to generate 4.74 times more return on investment than Boston Scientific. However, Nihon Kohden is 4.74 times more volatile than Boston Scientific Corp. It trades about 0.04 of its potential returns per unit of risk. Boston Scientific Corp is currently generating about 0.09 per unit of risk. If you would invest  1,456  in Nihon Kohden Corp on September 21, 2024 and sell it today you would earn a total of  59.00  from holding Nihon Kohden Corp or generate 4.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nihon Kohden Corp  vs.  Boston Scientific Corp

Nihon Kohden Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nihon Kohden Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, Nihon Kohden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Boston Scientific Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Boston Scientific is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nihon Kohden and Boston Scientific

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

The idea behind Nihon Kohden Corp and Boston Scientific Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.