Correlation Between Nissan Chemical and Asahi Kasei

Can any of the company-specific risk be diversified away by investing in both Nissan Chemical and Asahi Kasei 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 Nissan Chemical and Asahi Kasei into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nissan Chemical Industries and Asahi Kasei, you can compare the effects of market volatilities on Nissan Chemical and Asahi Kasei 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 Nissan Chemical with a short position of Asahi Kasei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nissan Chemical and Asahi Kasei.

Diversification Opportunities for Nissan Chemical and Asahi Kasei

-0.28

Correlation Coefficient

Nissan Chemical  Asahi Kasei

Very good diversification

The 3 months correlation between Nissan and Asahi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nissan Chemical Industries and Asahi Kasei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Kasei and Nissan Chemical 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 Nissan Chemical Industries are associated (or correlated) with Asahi Kasei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Kasei has no effect on the direction of Nissan Chemical i.e., Nissan Chemical and Asahi Kasei go up and down completely randomly.

Pair Corralation between Nissan Chemical and Asahi Kasei

Assuming the 90 days horizon Nissan Chemical Industries is expected to generate 18.71 times more return on investment than Asahi Kasei. However, Nissan Chemical is 18.71 times more volatile than Asahi Kasei. It trades about 0.05 of its potential returns per unit of risk. Asahi Kasei is currently generating about 0.28 per unit of risk. If you would invest  3,181  in Nissan Chemical Industries on September 23, 2024 and sell it today you would earn a total of  223.00  from holding Nissan Chemical Industries or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	19.7%
Values	Daily Returns

Nissan Chemical Industries  vs.  Asahi Kasei

Nissan Chemical Indu

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nissan Chemical Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Nissan Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Asahi Kasei

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Asahi Kasei has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Asahi Kasei may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nissan Chemical and Asahi Kasei

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

The idea behind Nissan Chemical Industries and Asahi Kasei 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.