Correlation Between DENSO and NGK Spark
Can any of the company-specific risk be diversified away by investing in both DENSO and NGK Spark 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 DENSO and NGK Spark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DENSO and NGK Spark Plug, you can compare the effects of market volatilities on DENSO and NGK Spark 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 DENSO with a short position of NGK Spark. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO and NGK Spark.
Diversification Opportunities for DENSO and NGK Spark
Good diversification
The 3 months correlation between DENSO and NGK is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding DENSO and NGK Spark Plug in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Spark Plug and DENSO 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 DENSO are associated (or correlated) with NGK Spark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGK Spark Plug has no effect on the direction of DENSO i.e., DENSO and NGK Spark go up and down completely randomly.
Pair Corralation between DENSO and NGK Spark
Assuming the 90 days horizon DENSO is expected to generate 19.91 times more return on investment than NGK Spark. However, DENSO is 19.91 times more volatile than NGK Spark Plug. It trades about 0.1 of its potential returns per unit of risk. NGK Spark Plug is currently generating about 0.07 per unit of risk. If you would invest 5,992 in DENSO on August 30, 2024 and sell it today you would lose (4,656) from holding DENSO or give up 77.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.01% |
| Values | Daily Returns |
DENSO vs. NGK Spark Plug
Performance |
| Timeline |
| DENSO |
| NGK Spark Plug |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
DENSO and NGK Spark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DENSO and NGK Spark
The main advantage of trading using opposite DENSO and NGK Spark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENSO position performs unexpectedly, NGK Spark 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 NGK Spark will offset losses from the drop in NGK Spark's long position.| DENSO vs. Bridgestone Corp ADR | DENSO vs. American Axle Manufacturing | DENSO vs. Dana Inc | DENSO vs. Aeva Technologies |
| NGK Spark vs. DENSO | NGK Spark vs. Bridgestone Corp ADR | NGK Spark vs. American Axle Manufacturing | NGK Spark vs. Dana Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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