Correlation Between Kubota and Cummins
Can any of the company-specific risk be diversified away by investing in both Kubota and Cummins 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 Kubota and Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kubota and Cummins, you can compare the effects of market volatilities on Kubota and Cummins 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 Kubota with a short position of Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kubota and Cummins.
Diversification Opportunities for Kubota and Cummins
Poor diversification
The 3 months correlation between Kubota and Cummins is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kubota and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and Kubota 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 Kubota are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Kubota i.e., Kubota and Cummins go up and down completely randomly.
Pair Corralation between Kubota and Cummins
Assuming the 90 days horizon Kubota is expected to generate 2.47 times less return on investment than Cummins. In addition to that, Kubota is 1.35 times more volatile than Cummins. It trades about 0.02 of its total potential returns per unit of risk. Cummins is currently generating about 0.08 per unit of volatility. If you would invest 22,800 in Cummins on January 26, 2024 and sell it today you would earn a total of 6,434 from holding Cummins or generate 28.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Kubota vs. Cummins
Performance |
| Timeline |
| Kubota |
| Cummins |
Kubota and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kubota and Cummins
The main advantage of trading using opposite Kubota and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kubota position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| Kubota vs. Lion Electric Corp | Kubota vs. NikolaCorp | Kubota vs. Buhler Industries | Kubota vs. CEA Industries Warrant |
| Cummins vs. Parker Hannifin | Cummins vs. Emerson Electric | Cummins vs. Smith AO | Cummins vs. Watts Water Technologies |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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