Correlation Between OMRON Corp and SMC Corp
Can any of the company-specific risk be diversified away by investing in both OMRON Corp and SMC 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 OMRON Corp and SMC Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OMRON Corp ADR and SMC Corp, you can compare the effects of market volatilities on OMRON Corp and SMC 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 OMRON Corp with a short position of SMC Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of OMRON Corp and SMC Corp.
Diversification Opportunities for OMRON Corp and SMC Corp
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between OMRON and SMC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding OMRON Corp ADR and SMC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Corp and OMRON Corp 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 OMRON Corp ADR are associated (or correlated) with SMC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Corp has no effect on the direction of OMRON Corp i.e., OMRON Corp and SMC Corp go up and down completely randomly.
Pair Corralation between OMRON Corp and SMC Corp
Assuming the 90 days horizon OMRON Corp ADR is expected to under-perform the SMC Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, OMRON Corp ADR is 1.11 times less risky than SMC Corp. The pink sheet trades about -0.05 of its potential returns per unit of risk. The SMC Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 48,666 in SMC Corp on November 19, 2024 and sell it today you would lose (14,066) from holding SMC Corp or give up 28.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
OMRON Corp ADR vs. SMC Corp
Performance |
| Timeline |
| OMRON Corp ADR |
| SMC Corp |
OMRON Corp and SMC Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OMRON Corp and SMC Corp
The main advantage of trading using opposite OMRON Corp and SMC Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OMRON Corp position performs unexpectedly, SMC 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 SMC Corp will offset losses from the drop in SMC Corp's long position.| OMRON Corp vs. Murata Manufacturing Co | OMRON Corp vs. LGL Group | OMRON Corp vs. Data IO | OMRON Corp vs. Bel Fuse A |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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