Correlation Between Metso Outotec and KOMATSU
Can any of the company-specific risk be diversified away by investing in both Metso Outotec and KOMATSU 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 Metso Outotec and KOMATSU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metso Outotec Oyj and KOMATSU LTD SPONS, you can compare the effects of market volatilities on Metso Outotec and KOMATSU 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 Metso Outotec with a short position of KOMATSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metso Outotec and KOMATSU.
Diversification Opportunities for Metso Outotec and KOMATSU
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Metso and KOMATSU is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Metso Outotec Oyj and KOMATSU LTD SPONS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOMATSU LTD SPONS and Metso Outotec 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 Metso Outotec Oyj are associated (or correlated) with KOMATSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOMATSU LTD SPONS has no effect on the direction of Metso Outotec i.e., Metso Outotec and KOMATSU go up and down completely randomly.
Pair Corralation between Metso Outotec and KOMATSU
Assuming the 90 days horizon Metso Outotec Oyj is expected to under-perform the KOMATSU. But the stock apears to be less risky and, when comparing its historical volatility, Metso Outotec Oyj is 1.04 times less risky than KOMATSU. The stock trades about -0.11 of its potential returns per unit of risk. The KOMATSU LTD SPONS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,380 in KOMATSU LTD SPONS on September 2, 2024 and sell it today you would earn a total of 120.00 from holding KOMATSU LTD SPONS or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metso Outotec Oyj vs. KOMATSU LTD SPONS
Performance |
| Timeline |
| Metso Outotec Oyj |
| KOMATSU LTD SPONS |
Metso Outotec and KOMATSU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metso Outotec and KOMATSU
The main advantage of trading using opposite Metso Outotec and KOMATSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metso Outotec position performs unexpectedly, KOMATSU 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 KOMATSU will offset losses from the drop in KOMATSU's long position.| Metso Outotec vs. SPORT LISBOA E | Metso Outotec vs. Columbia Sportswear | Metso Outotec vs. BII Railway Transportation | Metso Outotec vs. Sumitomo Mitsui Construction |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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