Correlation Between NIPPON STEEL and Boeing

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

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

Diversification Opportunities for NIPPON STEEL and Boeing

-0.16

Correlation Coefficient

NIPPON STEEL  Boeing

Good diversification

The 3 months correlation between NIPPON and Boeing is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing and NIPPON STEEL 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 STEEL SPADR are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and Boeing go up and down completely randomly.

Pair Corralation between NIPPON STEEL and Boeing

Assuming the 90 days trading horizon NIPPON STEEL is expected to generate 88.61 times less return on investment than Boeing. But when comparing it to its historical volatility, NIPPON STEEL SPADR is 1.82 times less risky than Boeing. It trades about 0.01 of its potential returns per unit of risk. The Boeing is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  14,014  in The Boeing on September 12, 2024 and sell it today you would earn a total of  1,870  from holding The Boeing or generate 13.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

NIPPON STEEL SPADR  vs.  The Boeing

NIPPON STEEL SPADR

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON STEEL SPADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NIPPON STEEL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Boeing

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Boeing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Boeing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NIPPON STEEL and Boeing

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

The idea behind NIPPON STEEL SPADR and The Boeing 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.