Correlation Between Spirax-Sarco Engineering and Keyence

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

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

Diversification Opportunities for Spirax-Sarco Engineering and Keyence

0.3

Correlation Coefficient

Spirax-Sarco Engineering  Keyence

Weak diversification

The 3 months correlation between Spirax-Sarco and Keyence is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Spirax Sarco Engineering plc and Keyence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyence and Spirax-Sarco Engineering 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 Spirax Sarco Engineering plc are associated (or correlated) with Keyence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyence has no effect on the direction of Spirax-Sarco Engineering i.e., Spirax-Sarco Engineering and Keyence go up and down completely randomly.

Pair Corralation between Spirax-Sarco Engineering and Keyence

Assuming the 90 days horizon Spirax Sarco Engineering plc is expected to under-perform the Keyence. In addition to that, Spirax-Sarco Engineering is 1.23 times more volatile than Keyence. It trades about -0.02 of its total potential returns per unit of risk. Keyence is currently generating about 0.0 per unit of volatility. If you would invest  49,147  in Keyence on February 22, 2024 and sell it today you would lose (2,649) from holding Keyence or give up 5.39% of portfolio value over 90 days.

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

Spirax Sarco Engineering plc  vs.  Keyence

Spirax-Sarco Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirax Sarco Engineering plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Keyence

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keyence are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Keyence is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Spirax-Sarco Engineering and Keyence

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

The idea behind Spirax Sarco Engineering plc and Keyence 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.