Correlation Between Casio Computer and Power Nickel

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

By analyzing existing cross correlation between Casio Computer CoLtd and Power Nickel, you can compare the effects of market volatilities on Casio Computer and Power Nickel 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 Casio Computer with a short position of Power Nickel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Casio Computer and Power Nickel.

Diversification Opportunities for Casio Computer and Power Nickel

0.71

Correlation Coefficient

Casio Computer  Power Nickel

Poor diversification

The 3 months correlation between Casio and Power is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer CoLtd and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel and Casio Computer 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 Casio Computer CoLtd are associated (or correlated) with Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of Casio Computer i.e., Casio Computer and Power Nickel go up and down completely randomly.

Pair Corralation between Casio Computer and Power Nickel

Assuming the 90 days trading horizon Casio Computer CoLtd is expected to under-perform the Power Nickel. But the stock apears to be less risky and, when comparing its historical volatility, Casio Computer CoLtd is 4.19 times less risky than Power Nickel. The stock trades about -0.01 of its potential returns per unit of risk. The Power Nickel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Power Nickel on October 24, 2024 and sell it today you would earn a total of  53.00  from holding Power Nickel or generate 278.95% return on investment over 90 days.

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

Casio Computer CoLtd  vs.  Power Nickel

Casio Computer CoLtd

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Casio Computer reported solid returns over the last few months and may actually be approaching a breakup point.

Power Nickel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Nickel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Power Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Casio Computer and Power Nickel

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

The idea behind Casio Computer CoLtd and Power Nickel 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.