Correlation Between Weichai Power and Ebara Corp
Can any of the company-specific risk be diversified away by investing in both Weichai Power and Ebara 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 Weichai Power and Ebara Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weichai Power Co and Ebara Corp ADR, you can compare the effects of market volatilities on Weichai Power and Ebara 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 Weichai Power with a short position of Ebara Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weichai Power and Ebara Corp.
Diversification Opportunities for Weichai Power and Ebara Corp
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Weichai and Ebara is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Weichai Power Co and Ebara Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebara Corp ADR and Weichai Power 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 Weichai Power Co are associated (or correlated) with Ebara Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebara Corp ADR has no effect on the direction of Weichai Power i.e., Weichai Power and Ebara Corp go up and down completely randomly.
Pair Corralation between Weichai Power and Ebara Corp
Assuming the 90 days horizon Weichai Power is expected to generate 6.77 times less return on investment than Ebara Corp. But when comparing it to its historical volatility, Weichai Power Co is 5.24 times less risky than Ebara Corp. It trades about 0.03 of its potential returns per unit of risk. Ebara Corp ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 411.00 in Ebara Corp ADR on September 1, 2024 and sell it today you would earn a total of 299.00 from holding Ebara Corp ADR or generate 72.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 45.49% |
| Values | Daily Returns |
Weichai Power Co vs. Ebara Corp ADR
Performance |
| Timeline |
| Weichai Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Ebara Corp ADR |
Weichai Power and Ebara Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weichai Power and Ebara Corp
The main advantage of trading using opposite Weichai Power and Ebara Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weichai Power position performs unexpectedly, Ebara 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 Ebara Corp will offset losses from the drop in Ebara Corp's long position.| Weichai Power vs. Xinjiang Goldwind Science | Weichai Power vs. Shanghai Electric Group | Weichai Power vs. American Superconductor | Weichai Power vs. Cummins |
| Ebara Corp vs. Xinjiang Goldwind Science | Ebara Corp vs. Schneider Electric SE | Ebara Corp vs. Vestas Wind Systems |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |