Correlation Between Oriental Land and Shimano

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

By analyzing existing cross correlation between Oriental Land Co and Shimano Inc ADR, you can compare the effects of market volatilities on Oriental Land and Shimano 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 Oriental Land with a short position of Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Land and Shimano.

Diversification Opportunities for Oriental Land and Shimano

0.49

Correlation Coefficient

Oriental Land  Shimano

Very weak diversification

The 3 months correlation between Oriental and Shimano is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Land Co and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR and Oriental Land 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 Oriental Land Co are associated (or correlated) with Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Oriental Land i.e., Oriental Land and Shimano go up and down completely randomly.

Pair Corralation between Oriental Land and Shimano

Assuming the 90 days horizon Oriental Land Co is expected to generate 90.35 times more return on investment than Shimano. However, Oriental Land is 90.35 times more volatile than Shimano Inc ADR. It trades about 0.17 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about 0.0 per unit of risk. If you would invest  14,400  in Oriental Land Co on September 12, 2024 and sell it today you would lose (12,085) from holding Oriental Land Co or give up 83.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	70.45%
Values	Daily Returns

Oriental Land Co  vs.  Shimano Inc ADR

Oriental Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Oriental Land is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shimano Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano Inc 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 Oriental Land and Shimano

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

The idea behind Oriental Land Co and Shimano Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.