Correlation Between Makita and PF Industries
Can any of the company-specific risk be diversified away by investing in both Makita and PF Industries 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 Makita and PF Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Makita and PF Industries, you can compare the effects of market volatilities on Makita and PF Industries 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 Makita with a short position of PF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Makita and PF Industries.
Diversification Opportunities for Makita and PF Industries
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Makita and PFIN is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Makita and PF Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PF Industries and Makita 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 Makita are associated (or correlated) with PF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PF Industries has no effect on the direction of Makita i.e., Makita and PF Industries go up and down completely randomly.
Pair Corralation between Makita and PF Industries
Assuming the 90 days horizon Makita is expected to generate 7.25 times more return on investment than PF Industries. However, Makita is 7.25 times more volatile than PF Industries. It trades about 0.07 of its potential returns per unit of risk. PF Industries is currently generating about 0.11 per unit of risk. If you would invest 2,166 in Makita on August 28, 2024 and sell it today you would earn a total of 563.00 from holding Makita or generate 25.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 55.87% |
| Values | Daily Returns |
Makita vs. PF Industries
Performance |
| Timeline |
| Makita |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PF Industries |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Makita and PF Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Makita and PF Industries
The main advantage of trading using opposite Makita and PF Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Makita position performs unexpectedly, PF Industries 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 PF Industries will offset losses from the drop in PF Industries' long position.The idea behind Makita and PF Industries 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.| PF Industries vs. Kennametal | PF Industries vs. Hillman Solutions Corp | PF Industries vs. AB SKF | PF Industries vs. Eastern Co |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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