Correlation Between Shimano and Six Flags

Can any of the company-specific risk be diversified away by investing in both Shimano and Six Flags 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 Six Flags 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 Six Flags Entertainment, you can compare the effects of market volatilities on Shimano and Six Flags 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 Six Flags. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Six Flags.

Diversification Opportunities for Shimano and Six Flags

-0.66

Correlation Coefficient

Shimano  Six Flags

Excellent diversification

The 3 months correlation between Shimano and Six is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Six Flags Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Flags Entertainment 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 Six Flags. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Flags Entertainment has no effect on the direction of Shimano i.e., Shimano and Six Flags go up and down completely randomly.

Pair Corralation between Shimano and Six Flags

Assuming the 90 days horizon Shimano Inc ADR is expected to under-perform the Six Flags. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shimano Inc ADR is 2.16 times less risky than Six Flags. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Six Flags Entertainment is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  2,755  in Six Flags Entertainment on September 12, 2024 and sell it today you would earn a total of  445.00  from holding Six Flags Entertainment or generate 16.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	9.68%
Values	Daily Returns

Shimano Inc ADR  vs.  Six Flags Entertainment

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.

Six Flags Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Six Flags Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Six Flags is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shimano and Six Flags

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

The idea behind Shimano Inc ADR and Six Flags Entertainment 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.