Correlation Between Nomura Holdings and Jefferies Financial

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

By analyzing existing cross correlation between Nomura Holdings ADR and Jefferies Financial Group, you can compare the effects of market volatilities on Nomura Holdings and Jefferies Financial 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 Nomura Holdings with a short position of Jefferies Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nomura Holdings and Jefferies Financial.

Diversification Opportunities for Nomura Holdings and Jefferies Financial

-0.03

Correlation Coefficient

Nomura Holdings  Jefferies Financial

Good diversification

The 3 months correlation between Nomura and Jefferies is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nomura Holdings ADR and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial and Nomura Holdings 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 Nomura Holdings ADR are associated (or correlated) with Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of Nomura Holdings i.e., Nomura Holdings and Jefferies Financial go up and down completely randomly.

Pair Corralation between Nomura Holdings and Jefferies Financial

Considering the 90-day investment horizon Nomura Holdings is expected to generate 1.2 times less return on investment than Jefferies Financial. But when comparing it to its historical volatility, Nomura Holdings ADR is 1.04 times less risky than Jefferies Financial. It trades about 0.06 of its potential returns per unit of risk. Jefferies Financial Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,487  in Jefferies Financial Group on March 15, 2024 and sell it today you would earn a total of  1,886  from holding Jefferies Financial Group or generate 75.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nomura Holdings ADR  vs.  Jefferies Financial Group

Nomura Holdings ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomura Holdings ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Nomura Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Jefferies Financial

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Jefferies Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nomura Holdings and Jefferies Financial

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

The idea behind Nomura Holdings ADR and Jefferies Financial Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.