Correlation Between Komatsu and Flowers Foods
Can any of the company-specific risk be diversified away by investing in both Komatsu and Flowers Foods 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 Flowers Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Komatsu and Flowers Foods, you can compare the effects of market volatilities on Komatsu and Flowers Foods 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 Flowers Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Komatsu and Flowers Foods.
Diversification Opportunities for Komatsu and Flowers Foods
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Komatsu and Flowers is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers Foods 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 Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of Komatsu i.e., Komatsu and Flowers Foods go up and down completely randomly.
Pair Corralation between Komatsu and Flowers Foods
Assuming the 90 days trading horizon Komatsu is expected to generate 1.51 times more return on investment than Flowers Foods. However, Komatsu is 1.51 times more volatile than Flowers Foods. It trades about 0.11 of its potential returns per unit of risk. Flowers Foods is currently generating about -0.11 per unit of risk. If you would invest 2,561 in Komatsu on October 9, 2024 and sell it today you would earn a total of 70.00 from holding Komatsu or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Komatsu vs. Flowers Foods
Performance |
| Timeline |
| Komatsu |
| Flowers Foods |
Komatsu and Flowers Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Komatsu and Flowers Foods
The main advantage of trading using opposite Komatsu and Flowers Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Komatsu position performs unexpectedly, Flowers Foods 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 Flowers Foods will offset losses from the drop in Flowers Foods' long position.| Komatsu vs. Hitachi Construction Machinery | Komatsu vs. Superior Plus Corp | Komatsu vs. NMI Holdings | Komatsu vs. SIVERS SEMICONDUCTORS AB |
| Flowers Foods vs. Superior Plus Corp | Flowers Foods vs. NMI Holdings | Flowers Foods vs. SIVERS SEMICONDUCTORS AB | Flowers Foods vs. Talanx AG |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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