Correlation Between Osaka Steel and NORTHROP

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

By analyzing existing cross correlation between Osaka Steel Co, and NORTHROP GRUMMAN P, you can compare the effects of market volatilities on Osaka Steel and NORTHROP 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 Osaka Steel with a short position of NORTHROP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Osaka Steel and NORTHROP.

Diversification Opportunities for Osaka Steel and NORTHROP

-0.55

Correlation Coefficient

Osaka Steel  NORTHROP

Excellent diversification

The 3 months correlation between Osaka and NORTHROP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Osaka Steel Co, and NORTHROP GRUMMAN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHROP GRUMMAN P and Osaka 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 Osaka Steel Co, are associated (or correlated) with NORTHROP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHROP GRUMMAN P has no effect on the direction of Osaka Steel i.e., Osaka Steel and NORTHROP go up and down completely randomly.

Pair Corralation between Osaka Steel and NORTHROP

Assuming the 90 days horizon Osaka Steel Co, is expected to generate 0.13 times more return on investment than NORTHROP. However, Osaka Steel Co, is 7.55 times less risky than NORTHROP. It trades about 0.13 of its potential returns per unit of risk. NORTHROP GRUMMAN P is currently generating about -0.09 per unit of risk. If you would invest  1,010  in Osaka Steel Co, on September 13, 2024 and sell it today you would earn a total of  10.00  from holding Osaka Steel Co, or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Osaka Steel Co,  vs.  NORTHROP GRUMMAN P

Osaka Steel Co,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Osaka Steel Co, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Osaka Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NORTHROP GRUMMAN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORTHROP GRUMMAN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORTHROP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Osaka Steel and NORTHROP

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

The idea behind Osaka Steel Co, and NORTHROP GRUMMAN P 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.