Correlation Between Nippon Yusen and International Container

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

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

Diversification Opportunities for Nippon Yusen and International Container

0.5

Correlation Coefficient

Nippon Yusen  International Container

Very weak diversification

The 3 months correlation between Nippon and International is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Yusen Kabushiki and International Container Termin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Container and Nippon Yusen 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 Nippon Yusen Kabushiki are associated (or correlated) with International Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Container has no effect on the direction of Nippon Yusen i.e., Nippon Yusen and International Container go up and down completely randomly.

Pair Corralation between Nippon Yusen and International Container

Assuming the 90 days horizon Nippon Yusen Kabushiki is expected to generate 0.6 times more return on investment than International Container. However, Nippon Yusen Kabushiki is 1.67 times less risky than International Container. It trades about -0.01 of its potential returns per unit of risk. International Container Terminal is currently generating about -0.01 per unit of risk. If you would invest  671.00  in Nippon Yusen Kabushiki on September 15, 2024 and sell it today you would lose (17.00) from holding Nippon Yusen Kabushiki or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Nippon Yusen Kabushiki  vs.  International Container Termin

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. In spite of fairly strong basic indicators, Nippon Yusen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

International Container

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nippon Yusen and International Container

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

The idea behind Nippon Yusen Kabushiki and International Container Terminal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.