Correlation Between Vestas Wind and Fanuc
Can any of the company-specific risk be diversified away by investing in both Vestas Wind and Fanuc 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 Vestas Wind and Fanuc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Fanuc, you can compare the effects of market volatilities on Vestas Wind and Fanuc 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 Vestas Wind with a short position of Fanuc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Fanuc.
Diversification Opportunities for Vestas Wind and Fanuc
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vestas and Fanuc is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Vestas Wind i.e., Vestas Wind and Fanuc go up and down completely randomly.
Pair Corralation between Vestas Wind and Fanuc
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Fanuc. In addition to that, Vestas Wind is 2.56 times more volatile than Fanuc. It trades about -0.31 of its total potential returns per unit of risk. Fanuc is currently generating about 0.1 per unit of volatility. If you would invest 1,306 in Fanuc on August 29, 2024 and sell it today you would earn a total of 46.00 from holding Fanuc or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vestas Wind Systems vs. Fanuc
Performance |
| Timeline |
| Vestas Wind Systems |
| Fanuc |
Vestas Wind and Fanuc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Fanuc
The main advantage of trading using opposite Vestas Wind and Fanuc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, Fanuc 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 Fanuc will offset losses from the drop in Fanuc's long position.The idea behind Vestas Wind Systems and Fanuc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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