Correlation Between Snap On and MISUMI

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

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

Diversification Opportunities for Snap On and MISUMI

-0.81

Correlation Coefficient

Snap On  MISUMI

Pay attention - limited upside

The 3 months correlation between Snap and MISUMI is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and MISUMI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MISUMI Group and Snap On 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 Snap On are associated (or correlated) with MISUMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MISUMI Group has no effect on the direction of Snap On i.e., Snap On and MISUMI go up and down completely randomly.

Pair Corralation between Snap On and MISUMI

Considering the 90-day investment horizon Snap On is expected to generate 0.64 times more return on investment than MISUMI. However, Snap On is 1.57 times less risky than MISUMI. It trades about 0.24 of its potential returns per unit of risk. MISUMI Group is currently generating about -0.04 per unit of risk. If you would invest  27,976  in Snap On on September 15, 2024 and sell it today you would earn a total of  7,535  from holding Snap On or generate 26.93% return on investment over 90 days.

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

Snap On  vs.  MISUMI Group

Snap On

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

MISUMI Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Snap On and MISUMI

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

The idea behind Snap On and MISUMI Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..