Correlation Between Komatsu and Tidewater

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

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

Diversification Opportunities for Komatsu and Tidewater

0.43

Correlation Coefficient

Komatsu  Tidewater

Very weak diversification

The 3 months correlation between Komatsu and Tidewater is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and Tidewater in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidewater and Komatsu 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 Komatsu are associated (or correlated) with Tidewater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidewater has no effect on the direction of Komatsu i.e., Komatsu and Tidewater go up and down completely randomly.

Pair Corralation between Komatsu and Tidewater

Assuming the 90 days horizon Komatsu is expected to under-perform the Tidewater. But the pink sheet apears to be less risky and, when comparing its historical volatility, Komatsu is 1.1 times less risky than Tidewater. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Tidewater is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,105  in Tidewater on January 26, 2024 and sell it today you would earn a total of  162.00  from holding Tidewater or generate 1.78% return on investment over 90 days.

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

Komatsu  vs.  Tidewater

Komatsu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Komatsu may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Tidewater

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Komatsu and Tidewater

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

The idea behind Komatsu and Tidewater 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.