Correlation Between Murata Manufacturing and Plug Power

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

By analyzing existing cross correlation between Murata Manufacturing Co and Plug Power, you can compare the effects of market volatilities on Murata Manufacturing and Plug Power 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 Murata Manufacturing with a short position of Plug Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murata Manufacturing and Plug Power.

Diversification Opportunities for Murata Manufacturing and Plug Power

-0.34

Correlation Coefficient

Murata Manufacturing  Plug Power

Very good diversification

The 3 months correlation between Murata and Plug is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and Plug Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plug Power and Murata Manufacturing 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 Murata Manufacturing Co are associated (or correlated) with Plug Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plug Power has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and Plug Power go up and down completely randomly.

Pair Corralation between Murata Manufacturing and Plug Power

Assuming the 90 days trading horizon Murata Manufacturing Co is expected to under-perform the Plug Power. But the stock apears to be less risky and, when comparing its historical volatility, Murata Manufacturing Co is 3.19 times less risky than Plug Power. The stock trades about -0.05 of its potential returns per unit of risk. The Plug Power is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Plug Power on September 10, 2024 and sell it today you would earn a total of  56.00  from holding Plug Power or generate 33.14% return on investment over 90 days.

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

Murata Manufacturing Co  vs.  Plug Power

Murata Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murata Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Plug Power

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Murata Manufacturing and Plug Power

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

The idea behind Murata Manufacturing Co and Plug Power 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.