Correlation Between NIPPON STEEL and Ricoh Company

Can any of the company-specific risk be diversified away by investing in both NIPPON STEEL and Ricoh Company 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 Ricoh Company 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 Ricoh Company, you can compare the effects of market volatilities on NIPPON STEEL and Ricoh Company 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 Ricoh Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIPPON STEEL and Ricoh Company.

Diversification Opportunities for NIPPON STEEL and Ricoh Company

-0.02

Correlation Coefficient

NIPPON STEEL  Ricoh Company

Good diversification

The 3 months correlation between NIPPON and Ricoh is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON STEEL SPADR and Ricoh Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh Company 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 Ricoh Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh Company has no effect on the direction of NIPPON STEEL i.e., NIPPON STEEL and Ricoh Company go up and down completely randomly.

Pair Corralation between NIPPON STEEL and Ricoh Company

Assuming the 90 days trading horizon NIPPON STEEL is expected to generate 2.1 times less return on investment than Ricoh Company. In addition to that, NIPPON STEEL is 1.65 times more volatile than Ricoh Company. It trades about 0.02 of its total potential returns per unit of risk. Ricoh Company is currently generating about 0.06 per unit of volatility. If you would invest  785.00  in Ricoh Company on September 12, 2024 and sell it today you would earn a total of  315.00  from holding Ricoh Company or generate 40.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.72%
Values	Daily Returns

NIPPON STEEL SPADR  vs.  Ricoh Company

NIPPON STEEL SPADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON STEEL SPADR are ranked lower than 1 (%) 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.

Ricoh Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ricoh Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Ricoh Company reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIPPON STEEL and Ricoh Company

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

The idea behind NIPPON STEEL SPADR and Ricoh Company 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 Stocks Directory module to find actively traded stocks across global markets.