Correlation Between Shimano and Basic-Fit
Can any of the company-specific risk be diversified away by investing in both Shimano and Basic-Fit 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 Shimano and Basic-Fit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shimano Inc ADR and Basic Fit NV, you can compare the effects of market volatilities on Shimano and Basic-Fit 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 Shimano with a short position of Basic-Fit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Basic-Fit.
Diversification Opportunities for Shimano and Basic-Fit
Poor diversification
The 3 months correlation between Shimano and Basic-Fit is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Basic Fit NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Fit NV and Shimano 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 Shimano Inc ADR are associated (or correlated) with Basic-Fit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Fit NV has no effect on the direction of Shimano i.e., Shimano and Basic-Fit go up and down completely randomly.
Pair Corralation between Shimano and Basic-Fit
Assuming the 90 days horizon Shimano Inc ADR is expected to under-perform the Basic-Fit. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shimano Inc ADR is 1.3 times less risky than Basic-Fit. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Basic Fit NV is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,490 in Basic Fit NV on September 2, 2024 and sell it today you would lose (131.00) from holding Basic Fit NV or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Shimano Inc ADR vs. Basic Fit NV
Performance |
| Timeline |
| Shimano Inc ADR |
| Basic Fit NV |
Shimano and Basic-Fit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shimano and Basic-Fit
The main advantage of trading using opposite Shimano and Basic-Fit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shimano position performs unexpectedly, Basic-Fit 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 Basic-Fit will offset losses from the drop in Basic-Fit's long position.| Shimano vs. Callaway Golf | Shimano vs. Peloton Interactive | Shimano vs. BANDAI NAMCO Holdings | Shimano vs. Nikon Corp |
| Basic-Fit vs. Clarus Corp | Basic-Fit vs. Escalade Incorporated | Basic-Fit vs. Canlan Ice Sports | Basic-Fit vs. Johnson Outdoors |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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