Correlation Between Mechanics Bank and Denso Corp
Can any of the company-specific risk be diversified away by investing in both Mechanics Bank and Denso Corp 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 Mechanics Bank and Denso Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechanics Bank and Denso Corp ADR, you can compare the effects of market volatilities on Mechanics Bank and Denso Corp 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 Mechanics Bank with a short position of Denso Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechanics Bank and Denso Corp.
Diversification Opportunities for Mechanics Bank and Denso Corp
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mechanics and Denso is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mechanics Bank and Denso Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denso Corp ADR and Mechanics Bank 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 Mechanics Bank are associated (or correlated) with Denso Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denso Corp ADR has no effect on the direction of Mechanics Bank i.e., Mechanics Bank and Denso Corp go up and down completely randomly.
Pair Corralation between Mechanics Bank and Denso Corp
Given the investment horizon of 90 days Mechanics Bank is expected to generate 0.51 times more return on investment than Denso Corp. However, Mechanics Bank is 1.97 times less risky than Denso Corp. It trades about 0.1 of its potential returns per unit of risk. Denso Corp ADR is currently generating about -0.02 per unit of risk. If you would invest 2,304,753 in Mechanics Bank on August 29, 2024 and sell it today you would earn a total of 295,247 from holding Mechanics Bank or generate 12.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 44.55% |
| Values | Daily Returns |
Mechanics Bank vs. Denso Corp ADR
Performance |
| Timeline |
| Mechanics Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Denso Corp ADR |
Mechanics Bank and Denso Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechanics Bank and Denso Corp
The main advantage of trading using opposite Mechanics Bank and Denso Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechanics Bank position performs unexpectedly, Denso Corp 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 Denso Corp will offset losses from the drop in Denso Corp's long position.| Mechanics Bank vs. Merchants Marine Bancorp | Mechanics Bank vs. MNB Holdings Corp | Mechanics Bank vs. Oconee Financial | Mechanics Bank vs. Harbor Bankshares |
| Denso Corp vs. Allison Transmission Holdings | Denso Corp vs. Luminar Technologies | Denso Corp vs. Lear Corporation | Denso Corp vs. BorgWarner |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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