Correlation Between Kubota and SPORTING
Can any of the company-specific risk be diversified away by investing in both Kubota and SPORTING 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 Kubota and SPORTING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kubota and SPORTING, you can compare the effects of market volatilities on Kubota and SPORTING 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 Kubota with a short position of SPORTING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kubota and SPORTING.
Diversification Opportunities for Kubota and SPORTING
Good diversification
The 3 months correlation between Kubota and SPORTING is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kubota and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING and Kubota 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 Kubota are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Kubota i.e., Kubota and SPORTING go up and down completely randomly.
Pair Corralation between Kubota and SPORTING
Assuming the 90 days trading horizon Kubota is expected to under-perform the SPORTING. But the stock apears to be less risky and, when comparing its historical volatility, Kubota is 1.33 times less risky than SPORTING. The stock trades about -0.01 of its potential returns per unit of risk. The SPORTING is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 85.00 in SPORTING on December 4, 2024 and sell it today you would earn a total of 9.00 from holding SPORTING or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kubota vs. SPORTING
Performance |
| Timeline |
| Kubota |
| SPORTING |
Kubota and SPORTING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kubota and SPORTING
The main advantage of trading using opposite Kubota and SPORTING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kubota position performs unexpectedly, SPORTING 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 SPORTING will offset losses from the drop in SPORTING's long position.The idea behind Kubota and SPORTING 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.| SPORTING vs. United States Steel | SPORTING vs. Axfood AB | SPORTING vs. HAPPY BELLY FOOD | SPORTING vs. TOMBADOR IRON LTD |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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