Correlation Between Kajima Corp and Vinci SA

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

By analyzing existing cross correlation between Kajima Corp ADR and Vinci SA ADR, you can compare the effects of market volatilities on Kajima Corp and Vinci SA 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 Kajima Corp with a short position of Vinci SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kajima Corp and Vinci SA.

Diversification Opportunities for Kajima Corp and Vinci SA

0.45

Correlation Coefficient

Kajima Corp  Vinci SA

Very weak diversification

The 3 months correlation between Kajima and Vinci is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kajima Corp ADR and Vinci SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vinci SA ADR and Kajima Corp 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 Kajima Corp ADR are associated (or correlated) with Vinci SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vinci SA ADR has no effect on the direction of Kajima Corp i.e., Kajima Corp and Vinci SA go up and down completely randomly.

Pair Corralation between Kajima Corp and Vinci SA

Assuming the 90 days horizon Kajima Corp ADR is expected to generate 2.05 times more return on investment than Vinci SA. However, Kajima Corp is 2.05 times more volatile than Vinci SA ADR. It trades about -0.01 of its potential returns per unit of risk. Vinci SA ADR is currently generating about -0.17 per unit of risk. If you would invest  1,874  in Kajima Corp ADR on September 22, 2024 and sell it today you would lose (79.00) from holding Kajima Corp ADR or give up 4.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Kajima Corp ADR  vs.  Vinci SA ADR

Kajima Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kajima Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Kajima Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vinci SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vinci SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kajima Corp and Vinci SA

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

The idea behind Kajima Corp ADR and Vinci SA ADR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.