Correlation Between Dear Cashmere and Nidec

Can any of the company-specific risk be diversified away by investing in both Dear Cashmere and Nidec 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 Dear Cashmere and Nidec into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dear Cashmere Holding and Nidec, you can compare the effects of market volatilities on Dear Cashmere and Nidec 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 Dear Cashmere with a short position of Nidec. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dear Cashmere and Nidec.

Diversification Opportunities for Dear Cashmere and Nidec

-0.1

Correlation Coefficient

Dear Cashmere  Nidec

Good diversification

The 3 months correlation between Dear and Nidec is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dear Cashmere Holding and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec and Dear Cashmere 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 Dear Cashmere Holding are associated (or correlated) with Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Dear Cashmere i.e., Dear Cashmere and Nidec go up and down completely randomly.

Pair Corralation between Dear Cashmere and Nidec

Given the investment horizon of 90 days Dear Cashmere Holding is expected to generate 1.8 times more return on investment than Nidec. However, Dear Cashmere is 1.8 times more volatile than Nidec. It trades about 0.11 of its potential returns per unit of risk. Nidec is currently generating about -0.04 per unit of risk. If you would invest  14.00  in Dear Cashmere Holding on September 5, 2024 and sell it today you would earn a total of  2.00  from holding Dear Cashmere Holding or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Dear Cashmere Holding  vs.  Nidec

Dear Cashmere Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dear Cashmere Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal fundamental indicators, Dear Cashmere reported solid returns over the last few months and may actually be approaching a breakup point.

Nidec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nidec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nidec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dear Cashmere and Nidec

The main advantage of trading using opposite Dear Cashmere and Nidec positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dear Cashmere position performs unexpectedly, Nidec 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 Nidec will offset losses from the drop in Nidec's long position.

The idea behind Dear Cashmere Holding and Nidec 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.