Correlation Between Nippon Steel and Vonovia SE

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

By analyzing existing cross correlation between Nippon Steel Corp and Vonovia SE, you can compare the effects of market volatilities on Nippon Steel and Vonovia SE 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 Vonovia SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Steel and Vonovia SE.

Diversification Opportunities for Nippon Steel and Vonovia SE

-0.45

Correlation Coefficient

Nippon Steel  Vonovia SE

Very good diversification

The 3 months correlation between Nippon and Vonovia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Steel Corp and Vonovia SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE 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 Corp are associated (or correlated) with Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE has no effect on the direction of Nippon Steel i.e., Nippon Steel and Vonovia SE go up and down completely randomly.

Pair Corralation between Nippon Steel and Vonovia SE

Assuming the 90 days horizon Nippon Steel Corp is expected to under-perform the Vonovia SE. But the pink sheet apears to be less risky and, when comparing its historical volatility, Nippon Steel Corp is 2.15 times less risky than Vonovia SE. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Vonovia SE is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,087  in Vonovia SE on May 7, 2025 and sell it today you would lose (37.00) from holding Vonovia SE or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Nippon Steel Corp  vs.  Vonovia SE

Nippon Steel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nippon Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Nippon Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vonovia SE

Risk-Adjusted Performance

Weak

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

Pair Trading with Nippon Steel and Vonovia SE

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

The idea behind Nippon Steel Corp and Vonovia SE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.