Correlation Between Shimano and BANDAI NAMCO

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

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

Diversification Opportunities for Shimano and BANDAI NAMCO

-0.52

Correlation Coefficient

Shimano  BANDAI NAMCO

Excellent diversification

The 3 months correlation between Shimano and BANDAI is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shimano and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings and Shimano 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 Shimano are associated (or correlated) with BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Shimano i.e., Shimano and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Shimano and BANDAI NAMCO

Assuming the 90 days horizon Shimano is expected to under-perform the BANDAI NAMCO. But the stock apears to be less risky and, when comparing its historical volatility, Shimano is 7.88 times less risky than BANDAI NAMCO. The stock trades about -0.17 of its potential returns per unit of risk. The BANDAI NAMCO Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  955.00  in BANDAI NAMCO Holdings on September 13, 2024 and sell it today you would earn a total of  1,070  from holding BANDAI NAMCO Holdings or generate 112.04% return on investment over 90 days.

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

Shimano  vs.  BANDAI NAMCO Holdings

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANDAI NAMCO Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BANDAI NAMCO reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shimano and BANDAI NAMCO

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

The idea behind Shimano and BANDAI NAMCO Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.