Correlation Between Nippon Carbon and Microsoft

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

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

Diversification Opportunities for Nippon Carbon and Microsoft

0.71

Correlation Coefficient

Nippon Carbon  Microsoft

Poor diversification

The 3 months correlation between Nippon and Microsoft is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Carbon Co and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Nippon Carbon 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 Carbon Co are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Nippon Carbon i.e., Nippon Carbon and Microsoft go up and down completely randomly.

Pair Corralation between Nippon Carbon and Microsoft

If you would invest  3,028  in Nippon Carbon Co on January 17, 2024 and sell it today you would earn a total of  0.00  from holding Nippon Carbon Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

Nippon Carbon Co  vs.  Microsoft

Nippon Carbon

Risk-Adjusted Performance

0 of 100

Very Weak

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

Microsoft

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nippon Carbon and Microsoft

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

The idea behind Nippon Carbon Co and Microsoft 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.