Correlation Between KOMATSU and WIMFARM SA

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

By analyzing existing cross correlation between KOMATSU LTD SPONS and WIMFARM SA EO, you can compare the effects of market volatilities on KOMATSU and WIMFARM 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 KOMATSU with a short position of WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOMATSU and WIMFARM SA.

Diversification Opportunities for KOMATSU and WIMFARM SA

-0.3

Correlation Coefficient

KOMATSU  WIMFARM SA

Very good diversification

The 3 months correlation between KOMATSU and WIMFARM is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding KOMATSU LTD SPONS and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO 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 LTD SPONS are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of KOMATSU i.e., KOMATSU and WIMFARM SA go up and down completely randomly.

Pair Corralation between KOMATSU and WIMFARM SA

Assuming the 90 days trading horizon KOMATSU is expected to generate 1.05 times less return on investment than WIMFARM SA. But when comparing it to its historical volatility, KOMATSU LTD SPONS is 3.09 times less risky than WIMFARM SA. It trades about 0.11 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  314.00  in WIMFARM SA EO on September 4, 2024 and sell it today you would earn a total of  12.00  from holding WIMFARM SA EO or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

KOMATSU LTD SPONS  vs.  WIMFARM SA EO

KOMATSU LTD SPONS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KOMATSU LTD SPONS are ranked lower than 8 (%) 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.

WIMFARM SA EO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WIMFARM SA EO are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WIMFARM SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KOMATSU and WIMFARM SA

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

The idea behind KOMATSU LTD SPONS and WIMFARM SA EO 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.