Correlation Between Komatsu and Alamo
Can any of the company-specific risk be diversified away by investing in both Komatsu and Alamo 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 Komatsu and Alamo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Komatsu and Alamo Group, you can compare the effects of market volatilities on Komatsu and Alamo 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 Komatsu with a short position of Alamo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Komatsu and Alamo.
Diversification Opportunities for Komatsu and Alamo
Average diversification
The 3 months correlation between Komatsu and Alamo is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and Alamo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alamo Group and Komatsu 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 Komatsu are associated (or correlated) with Alamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alamo Group has no effect on the direction of Komatsu i.e., Komatsu and Alamo go up and down completely randomly.
Pair Corralation between Komatsu and Alamo
Assuming the 90 days horizon Komatsu is expected to generate 15.39 times less return on investment than Alamo. But when comparing it to its historical volatility, Komatsu is 2.19 times less risky than Alamo. It trades about 0.04 of its potential returns per unit of risk. Alamo Group is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 16,880 in Alamo Group on August 24, 2024 and sell it today you would earn a total of 2,930 from holding Alamo Group or generate 17.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Komatsu vs. Alamo Group
Performance |
| Timeline |
| Komatsu |
| Alamo Group |
Komatsu and Alamo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Komatsu and Alamo
The main advantage of trading using opposite Komatsu and Alamo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Komatsu position performs unexpectedly, Alamo 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 Alamo will offset losses from the drop in Alamo's long position.| Komatsu vs. Element Solutions | Komatsu vs. Orion Engineered Carbons | Komatsu vs. Minerals Technologies | Komatsu vs. Ingevity Corp |
| Alamo vs. Hyster Yale Materials Handling | Alamo vs. Columbus McKinnon | Alamo vs. AGCO Corporation | Alamo vs. Titan International |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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