Correlation Between NI Holdings and Japan Steel

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

By analyzing existing cross correlation between NI Holdings and The Japan Steel, you can compare the effects of market volatilities on NI Holdings and Japan Steel 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 NI Holdings with a short position of Japan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NI Holdings and Japan Steel.

Diversification Opportunities for NI Holdings and Japan Steel

0.63

Correlation Coefficient

NI Holdings  Japan Steel

Poor diversification

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

Pair Corralation between NI Holdings and Japan Steel

If you would invest  1,515  in NI Holdings on September 18, 2024 and sell it today you would earn a total of  160.00  from holding NI Holdings or generate 10.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	11.11%
Values	Daily Returns

NI Holdings  vs.  The Japan Steel

NI Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Japan Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NI Holdings and Japan Steel

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

The idea behind NI Holdings and The Japan Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.