Correlation Between Austin Engineering and Komatsu

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

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

Diversification Opportunities for Austin Engineering and Komatsu

-0.53

Correlation Coefficient

Austin Engineering  Komatsu

Excellent diversification

The 3 months correlation between Austin and Komatsu is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Austin Engineering Limited and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu and Austin 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 Austin Engineering Limited 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 has no effect on the direction of Austin Engineering i.e., Austin Engineering and Komatsu go up and down completely randomly.

Pair Corralation between Austin Engineering and Komatsu

Assuming the 90 days horizon Austin Engineering Limited is expected to under-perform the Komatsu. In addition to that, Austin Engineering is 3.6 times more volatile than Komatsu. It trades about -0.11 of its total potential returns per unit of risk. Komatsu is currently generating about 0.1 per unit of volatility. If you would invest  2,741  in Komatsu on December 29, 2024 and sell it today you would earn a total of  229.00  from holding Komatsu or generate 8.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Austin Engineering Limited  vs.  Komatsu

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Komatsu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Komatsu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Austin Engineering and Komatsu

The main advantage of trading using opposite Austin Engineering and Komatsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austin Engineering 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 Austin Engineering Limited and Komatsu 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.