Correlation Between Stanley Black and Makita
Can any of the company-specific risk be diversified away by investing in both Stanley Black and Makita 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 Stanley Black and Makita into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stanley Black Decker and Makita, you can compare the effects of market volatilities on Stanley Black and Makita 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 Stanley Black with a short position of Makita. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stanley Black and Makita.
Diversification Opportunities for Stanley Black and Makita
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stanley and Makita is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stanley Black Decker and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita and Stanley Black 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 Stanley Black Decker are associated (or correlated) with Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Stanley Black i.e., Stanley Black and Makita go up and down completely randomly.
Pair Corralation between Stanley Black and Makita
Considering the 90-day investment horizon Stanley Black is expected to generate 5.78 times less return on investment than Makita. But when comparing it to its historical volatility, Stanley Black Decker is 1.03 times less risky than Makita. It trades about 0.01 of its potential returns per unit of risk. Makita is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,487 in Makita on September 3, 2024 and sell it today you would earn a total of 242.00 from holding Makita or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 46.15% |
| Values | Daily Returns |
Stanley Black Decker vs. Makita
Performance |
| Timeline |
| Stanley Black Decker |
| Makita |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Stanley Black and Makita Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stanley Black and Makita
The main advantage of trading using opposite Stanley Black and Makita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stanley Black position performs unexpectedly, Makita 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 Makita will offset losses from the drop in Makita's long position.| Stanley Black vs. Toro Co | Stanley Black vs. Timken Company | Stanley Black vs. Lincoln Electric Holdings | Stanley Black vs. Kennametal |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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