Correlation Between Amada and THK Co
Can any of the company-specific risk be diversified away by investing in both Amada and THK Co 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 Amada and THK Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amada Co and THK Co Ltd, you can compare the effects of market volatilities on Amada and THK Co 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 Amada with a short position of THK Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amada and THK Co.
Diversification Opportunities for Amada and THK Co
Average diversification
The 3 months correlation between Amada and THK is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and THK Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THK Co and Amada 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 Amada Co are associated (or correlated) with THK Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THK Co has no effect on the direction of Amada i.e., Amada and THK Co go up and down completely randomly.
Pair Corralation between Amada and THK Co
Assuming the 90 days horizon Amada Co is expected to under-perform the THK Co. In addition to that, Amada is 8.79 times more volatile than THK Co Ltd. It trades about -0.1 of its total potential returns per unit of risk. THK Co Ltd is currently generating about 0.05 per unit of volatility. If you would invest 958.00 in THK Co Ltd on September 4, 2024 and sell it today you would earn a total of 276.00 from holding THK Co Ltd or generate 28.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amada Co vs. THK Co Ltd
Performance |
| Timeline |
| Amada |
| THK Co |
Amada and THK Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amada and THK Co
The main advantage of trading using opposite Amada and THK Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amada position performs unexpectedly, THK Co 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 THK Co will offset losses from the drop in THK Co's long position.The idea behind Amada Co and THK Co Ltd 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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