Correlation Between AGCO and Komatsu
Can any of the company-specific risk be diversified away by investing in both AGCO and Komatsu 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 AGCO and Komatsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGCO Corporation and Komatsu, you can compare the effects of market volatilities on AGCO and Komatsu 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 AGCO with a short position of Komatsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGCO and Komatsu.
Diversification Opportunities for AGCO and Komatsu
Very weak diversification
The 3 months correlation between AGCO and Komatsu is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AGCO Corp. and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu and AGCO 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 AGCO Corporation are associated (or correlated) with Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of AGCO i.e., AGCO and Komatsu go up and down completely randomly.
Pair Corralation between AGCO and Komatsu
Assuming the 90 days horizon AGCO Corporation is expected to generate 1.35 times more return on investment than Komatsu. However, AGCO is 1.35 times more volatile than Komatsu. It trades about 0.11 of its potential returns per unit of risk. Komatsu is currently generating about 0.13 per unit of risk. If you would invest 9,011 in AGCO Corporation on September 4, 2024 and sell it today you would earn a total of 609.00 from holding AGCO Corporation or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AGCO Corp. vs. Komatsu
Performance |
| Timeline |
| AGCO |
| Komatsu |
AGCO and Komatsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGCO and Komatsu
The main advantage of trading using opposite AGCO and Komatsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGCO position performs unexpectedly, Komatsu 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 Komatsu will offset losses from the drop in Komatsu's long position.| AGCO vs. Komatsu | AGCO vs. CNH Industrial NV | AGCO vs. KUBOTA P ADR20 | AGCO vs. Hitachi Construction Machinery |
| Komatsu vs. CNH Industrial NV | Komatsu vs. KUBOTA P ADR20 | Komatsu vs. Hitachi Construction Machinery | Komatsu vs. Terex |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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