Correlation Between Vista Outdoor and Shimano

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

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

Diversification Opportunities for Vista Outdoor and Shimano

-0.87

Correlation Coefficient

Vista Outdoor  Shimano

Pay attention - limited upside

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

Pair Corralation between Vista Outdoor and Shimano

Given the investment horizon of 90 days Vista Outdoor is expected to generate 0.89 times more return on investment than Shimano. However, Vista Outdoor is 1.12 times less risky than Shimano. It trades about 0.15 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.25 per unit of risk. 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

Vista Outdoor  vs.  Shimano Inc ADR

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.

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.

Pair Trading with Vista Outdoor and Shimano

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

The idea behind Vista Outdoor and Shimano Inc 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.