Correlation Between Superior Industries and Denso Corp

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Can any of the company-specific risk be diversified away by investing in both Superior Industries and Denso Corp 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 Superior Industries and Denso Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Superior Industries International and Denso Corp ADR, you can compare the effects of market volatilities on Superior Industries and Denso Corp 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 Superior Industries with a short position of Denso Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Industries and Denso Corp.

Diversification Opportunities for Superior Industries and Denso Corp

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Superior and Denso is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Superior Industries Internatio and Denso Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denso Corp ADR and Superior Industries 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 Superior Industries International are associated (or correlated) with Denso Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denso Corp ADR has no effect on the direction of Superior Industries i.e., Superior Industries and Denso Corp go up and down completely randomly.

Pair Corralation between Superior Industries and Denso Corp

Considering the 90-day investment horizon Superior Industries International is expected to under-perform the Denso Corp. But the stock apears to be less risky and, when comparing its historical volatility, Superior Industries International is 1.69 times less risky than Denso Corp. The stock trades about -0.01 of its potential returns per unit of risk. The Denso Corp ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Denso Corp ADR on December 29, 2023 and sell it today you would earn a total of  636.00  from holding Denso Corp ADR or generate 49.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Superior Industries Internatio  vs.  Denso Corp ADR

 Performance 
       Timeline  
Superior Industries 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Superior Industries International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
Denso Corp ADR 

Risk-Adjusted Performance

22 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Denso Corp ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Denso Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Superior Industries and Denso Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Superior Industries and Denso Corp

The main advantage of trading using opposite Superior Industries and Denso Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Industries position performs unexpectedly, Denso Corp 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 Denso Corp will offset losses from the drop in Denso Corp's long position.
The idea behind Superior Industries International and Denso Corp ADR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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