Correlation Between Amada and THK Co

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

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

Diversification Opportunities for Amada and THK Co

0.53

Correlation Coefficient

Amada  THK Co

Very weak diversification

The 3 months correlation between Amada and THK is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and THK Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THK Co and Amada 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 Amada Co are associated (or correlated) with THK Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THK Co has no effect on the direction of Amada i.e., Amada and THK Co go up and down completely randomly.

Pair Corralation between Amada and THK Co

Assuming the 90 days horizon Amada is expected to generate 4.33 times less return on investment than THK Co. But when comparing it to its historical volatility, Amada Co is 7.98 times less risky than THK Co. It trades about 0.13 of its potential returns per unit of risk. THK Co Ltd is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,168  in THK Co Ltd on December 25, 2024 and sell it today you would earn a total of  90.00  from holding THK Co Ltd or generate 7.71% return on investment over 90 days.

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

Amada Co  vs.  THK Co Ltd

Amada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Amada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

THK Co

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THK Co Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, THK Co may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Amada and THK Co

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

The idea behind Amada Co and THK Co Ltd 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.