Correlation Between Shimano and Vista Outdoor

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

Diversification Opportunities for Shimano and Vista Outdoor

-0.87

Correlation Coefficient

Shimano  Vista Outdoor

Pay attention - limited upside

The 3 months correlation between Shimano and Vista is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Vista Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Outdoor 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 Vista Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Outdoor has no effect on the direction of Shimano i.e., Shimano and Vista Outdoor go up and down completely randomly.

Pair Corralation between Shimano and Vista Outdoor

Assuming the 90 days horizon Shimano Inc ADR is expected to under-perform the Vista Outdoor. In addition to that, Shimano is 1.12 times more volatile than Vista Outdoor. It trades about -0.25 of its total potential returns per unit of risk. Vista Outdoor is currently generating about 0.15 per unit of volatility. If you would invest  3,905  in Vista Outdoor on September 3, 2024 and sell it today you would earn a total of  558.00  from holding Vista Outdoor or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Shimano Inc ADR  vs.  Vista Outdoor

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.

Vista Outdoor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Outdoor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vista Outdoor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shimano and Vista Outdoor

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

The idea behind Shimano Inc ADR and Vista Outdoor 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.