Correlation Between SMC Corp and Vestas Wind
Can any of the company-specific risk be diversified away by investing in both SMC Corp and Vestas Wind 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 SMC Corp and Vestas Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMC Corp Japan and Vestas Wind Systems, you can compare the effects of market volatilities on SMC Corp and Vestas Wind 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 SMC Corp with a short position of Vestas Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Vestas Wind.
Diversification Opportunities for SMC Corp and Vestas Wind
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SMC and Vestas is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems and SMC 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 SMC Corp Japan are associated (or correlated) with Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of SMC Corp i.e., SMC Corp and Vestas Wind go up and down completely randomly.
Pair Corralation between SMC Corp and Vestas Wind
Assuming the 90 days horizon SMC Corp Japan is expected to generate 0.32 times more return on investment than Vestas Wind. However, SMC Corp Japan is 3.13 times less risky than Vestas Wind. It trades about 0.09 of its potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.3 per unit of risk. If you would invest 2,114 in SMC Corp Japan on August 29, 2024 and sell it today you would earn a total of 54.00 from holding SMC Corp Japan or generate 2.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMC Corp Japan vs. Vestas Wind Systems
Performance |
| Timeline |
| SMC Corp Japan |
| Vestas Wind Systems |
SMC Corp and Vestas Wind Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMC Corp and Vestas Wind
The main advantage of trading using opposite SMC Corp and Vestas Wind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, Vestas Wind 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 Vestas Wind will offset losses from the drop in Vestas Wind's long position.| SMC Corp vs. Schneider Electric SE | SMC Corp vs. Atlas Copco AB | SMC Corp vs. Fanuc | SMC Corp vs. Sandvik AB |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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