Correlation Between Komatsu and Sany Heavy

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

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

Diversification Opportunities for Komatsu and Sany Heavy

0.55

Correlation Coefficient

Komatsu  Sany Heavy

Very weak diversification

The 3 months correlation between Komatsu and Sany is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and Sany Heavy Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Equipment and Komatsu 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 Komatsu are associated (or correlated) with Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Equipment has no effect on the direction of Komatsu i.e., Komatsu and Sany Heavy go up and down completely randomly.

Pair Corralation between Komatsu and Sany Heavy

Assuming the 90 days trading horizon Komatsu is expected to generate 0.46 times more return on investment than Sany Heavy. However, Komatsu is 2.16 times less risky than Sany Heavy. It trades about 0.03 of its potential returns per unit of risk. Sany Heavy Equipment is currently generating about 0.01 per unit of risk. If you would invest  2,291  in Komatsu on September 4, 2024 and sell it today you would earn a total of  270.00  from holding Komatsu or generate 11.79% return on investment over 90 days.

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

Komatsu  vs.  Sany Heavy Equipment

Komatsu

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Komatsu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sany Heavy Equipment

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Komatsu and Sany Heavy

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

The idea behind Komatsu and Sany Heavy Equipment 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.