Correlation Between Vestas Wind and Fanuc

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

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

Diversification Opportunities for Vestas Wind and Fanuc

0.38

Correlation Coefficient

Vestas Wind  Fanuc

Weak diversification

The 3 months correlation between Vestas and Fanuc is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Vestas Wind i.e., Vestas Wind and Fanuc go up and down completely randomly.

Pair Corralation between Vestas Wind and Fanuc

Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Fanuc. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vestas Wind Systems is 1.32 times less risky than Fanuc. The pink sheet trades about -0.19 of its potential returns per unit of risk. The Fanuc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,921  in Fanuc on September 30, 2024 and sell it today you would lose (409.00) from holding Fanuc or give up 14.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vestas Wind Systems  vs.  Fanuc

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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.

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Vestas Wind and Fanuc

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

The idea behind Vestas Wind Systems and Fanuc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.