Correlation Between Canlan Ice and Shimano

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

By analyzing existing cross correlation between Canlan Ice Sports and Shimano Inc ADR, you can compare the effects of market volatilities on Canlan Ice and Shimano 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 Canlan Ice with a short position of Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canlan Ice and Shimano.

Diversification Opportunities for Canlan Ice and Shimano

-0.66

Correlation Coefficient

Canlan Ice  Shimano

Excellent diversification

The 3 months correlation between Canlan and Shimano is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR and Canlan Ice 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 Canlan Ice Sports are associated (or correlated) with Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Canlan Ice i.e., Canlan Ice and Shimano go up and down completely randomly.

Pair Corralation between Canlan Ice and Shimano

Assuming the 90 days horizon Canlan Ice Sports is expected to generate 0.09 times more return on investment than Shimano. However, Canlan Ice Sports is 11.18 times less risky than Shimano. It trades about 0.18 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.29 per unit of risk. If you would invest  292.00  in Canlan Ice Sports on September 25, 2024 and sell it today you would earn a total of  5.00  from holding Canlan Ice Sports or generate 1.71% return on investment over 90 days.

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

Canlan Ice Sports  vs.  Shimano Inc ADR

Canlan Ice Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shimano Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Canlan Ice and Shimano

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

The idea behind Canlan Ice Sports and Shimano Inc 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.