Correlation Between SHIMANO INC and COFFEE HOLDING

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

By analyzing existing cross correlation between SHIMANO INC UNSPADR10 and COFFEE HOLDING, you can compare the effects of market volatilities on SHIMANO INC and COFFEE HOLDING 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 SHIMANO INC with a short position of COFFEE HOLDING. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIMANO INC and COFFEE HOLDING.

Diversification Opportunities for SHIMANO INC and COFFEE HOLDING

0.36

Correlation Coefficient

SHIMANO INC  COFFEE HOLDING

Weak diversification

The 3 months correlation between SHIMANO and COFFEE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding SHIMANO INC UNSPADR10 and COFFEE HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFFEE HOLDING and SHIMANO INC 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 SHIMANO INC UNSPADR10 are associated (or correlated) with COFFEE HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFFEE HOLDING has no effect on the direction of SHIMANO INC i.e., SHIMANO INC and COFFEE HOLDING go up and down completely randomly.

Pair Corralation between SHIMANO INC and COFFEE HOLDING

Assuming the 90 days trading horizon SHIMANO INC UNSPADR10 is expected to generate 0.38 times more return on investment than COFFEE HOLDING. However, SHIMANO INC UNSPADR10 is 2.66 times less risky than COFFEE HOLDING. It trades about 0.18 of its potential returns per unit of risk. COFFEE HOLDING is currently generating about 0.03 per unit of risk. If you would invest  1,240  in SHIMANO INC UNSPADR10 on March 3, 2024 and sell it today you would earn a total of  250.00  from holding SHIMANO INC UNSPADR10 or generate 20.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

SHIMANO INC UNSPADR10  vs.  COFFEE HOLDING

SHIMANO INC UNSPADR10

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SHIMANO INC UNSPADR10 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, SHIMANO INC reported solid returns over the last few months and may actually be approaching a breakup point.

COFFEE HOLDING

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COFFEE HOLDING are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, COFFEE HOLDING may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with SHIMANO INC and COFFEE HOLDING

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

The idea behind SHIMANO INC UNSPADR10 and COFFEE HOLDING 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.