Correlation Between BANK HANDLOWY and KOMATSU

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

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

Diversification Opportunities for BANK HANDLOWY and KOMATSU

-0.11

Correlation Coefficient

BANK HANDLOWY  KOMATSU

Good diversification

The 3 months correlation between BANK and KOMATSU is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BANK HANDLOWY and KOMATSU LTD SPONS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOMATSU LTD SPONS and BANK HANDLOWY 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 BANK HANDLOWY are associated (or correlated) with KOMATSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOMATSU LTD SPONS has no effect on the direction of BANK HANDLOWY i.e., BANK HANDLOWY and KOMATSU go up and down completely randomly.

Pair Corralation between BANK HANDLOWY and KOMATSU

Assuming the 90 days trading horizon BANK HANDLOWY is expected to generate 2.66 times more return on investment than KOMATSU. However, BANK HANDLOWY is 2.66 times more volatile than KOMATSU LTD SPONS. It trades about 0.07 of its potential returns per unit of risk. KOMATSU LTD SPONS is currently generating about 0.04 per unit of risk. If you would invest  505.00  in BANK HANDLOWY on October 5, 2024 and sell it today you would earn a total of  1,545  from holding BANK HANDLOWY or generate 305.94% return on investment over 90 days.

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

BANK HANDLOWY  vs.  KOMATSU LTD SPONS

BANK HANDLOWY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK HANDLOWY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BANK HANDLOWY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

KOMATSU LTD SPONS

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days KOMATSU LTD SPONS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, KOMATSU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BANK HANDLOWY and KOMATSU

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

The idea behind BANK HANDLOWY and KOMATSU LTD SPONS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.