Correlation Between SMC Corp and Ebara Corp

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both SMC Corp and Ebara Corp 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 SMC Corp and Ebara Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMC Corp Japan and Ebara Corp ADR, you can compare the effects of market volatilities on SMC Corp and Ebara Corp 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 SMC Corp with a short position of Ebara Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Ebara Corp.

Diversification Opportunities for SMC Corp and Ebara Corp

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between SMC and Ebara is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and Ebara Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebara Corp ADR and SMC Corp 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 SMC Corp Japan are associated (or correlated) with Ebara Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebara Corp ADR has no effect on the direction of SMC Corp i.e., SMC Corp and Ebara Corp go up and down completely randomly.

Pair Corralation between SMC Corp and Ebara Corp

Assuming the 90 days horizon SMC Corp is expected to generate 7.06 times less return on investment than Ebara Corp. But when comparing it to its historical volatility, SMC Corp Japan is 1.47 times less risky than Ebara Corp. It trades about 0.02 of its potential returns per unit of risk. Ebara Corp ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  626.00  in Ebara Corp ADR on September 4, 2024 and sell it today you would earn a total of  124.00  from holding Ebara Corp ADR or generate 19.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SMC Corp Japan  vs.  Ebara Corp ADR

 Performance 
       Timeline  
SMC Corp Japan 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in SMC Corp Japan are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Ebara Corp ADR 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Ebara Corp ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ebara Corp showed solid returns over the last few months and may actually be approaching a breakup point.

SMC Corp and Ebara Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SMC Corp and Ebara Corp

The main advantage of trading using opposite SMC Corp and Ebara Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, Ebara Corp 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 Ebara Corp will offset losses from the drop in Ebara Corp's long position.
The idea behind SMC Corp Japan and Ebara Corp 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.
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

Other Complementary Tools

Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Crypto Correlations
Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins