Correlation Between Makita and LS Starrett
Can any of the company-specific risk be diversified away by investing in both Makita and LS Starrett 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 LS Starrett into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Makita and The LS Starrett, you can compare the effects of market volatilities on Makita and LS Starrett 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 LS Starrett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Makita and LS Starrett.
Diversification Opportunities for Makita and LS Starrett
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Makita and SCXLB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Makita and The LS Starrett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS Starrett 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 LS Starrett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS Starrett has no effect on the direction of Makita i.e., Makita and LS Starrett go up and down completely randomly.
Pair Corralation between Makita and LS Starrett
Assuming the 90 days horizon Makita is expected to generate 6.16 times more return on investment than LS Starrett. However, Makita is 6.16 times more volatile than The LS Starrett. It trades about 0.07 of its potential returns per unit of risk. The LS Starrett is currently generating about 0.04 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 | Flat |
| Strength | Insignificant |
| Accuracy | 76.57% |
| Values | Daily Returns |
Makita vs. The LS Starrett
Performance |
| Timeline |
| Makita |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| LS Starrett |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Makita and LS Starrett Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Makita and LS Starrett
The main advantage of trading using opposite Makita and LS Starrett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Makita position performs unexpectedly, LS Starrett 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 LS Starrett will offset losses from the drop in LS Starrett's long position.The idea behind Makita and The LS Starrett 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.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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