Correlation Between Shimano and Encompass Holdings

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

By analyzing existing cross correlation between Shimano Inc ADR and Encompass Holdings, you can compare the effects of market volatilities on Shimano and Encompass Holdings 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 Encompass Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Encompass Holdings.

Diversification Opportunities for Shimano and Encompass Holdings

0.0

Correlation Coefficient

Shimano  Encompass Holdings

Pay attention - limited upside

The 3 months correlation between Shimano and Encompass is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Encompass Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encompass 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 Inc ADR are associated (or correlated) with Encompass Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encompass Holdings has no effect on the direction of Shimano i.e., Shimano and Encompass Holdings go up and down completely randomly.

Pair Corralation between Shimano and Encompass Holdings

If you would invest  0.01  in Encompass Holdings on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Encompass Holdings or generate 0.0% return on investment over 90 days.

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

Shimano Inc ADR  vs.  Encompass Holdings

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 uncertain 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.

Encompass Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encompass Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Encompass Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Shimano and Encompass Holdings

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

The idea behind Shimano Inc ADR and Encompass 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.