Correlation Between CubicFarm Systems and Komatsu

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

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

Diversification Opportunities for CubicFarm Systems and Komatsu

0.11

Correlation Coefficient

CubicFarm Systems  Komatsu

Average diversification

The 3 months correlation between CubicFarm and Komatsu is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CubicFarm Systems Corp and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu and CubicFarm Systems 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 CubicFarm Systems Corp 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 CubicFarm Systems i.e., CubicFarm Systems and Komatsu go up and down completely randomly.

Pair Corralation between CubicFarm Systems and Komatsu

Assuming the 90 days horizon CubicFarm Systems Corp is expected to generate 150.34 times more return on investment than Komatsu. However, CubicFarm Systems is 150.34 times more volatile than Komatsu. It trades about 0.24 of its potential returns per unit of risk. Komatsu is currently generating about 0.06 per unit of risk. If you would invest  6.00  in CubicFarm Systems Corp on September 18, 2024 and sell it today you would earn a total of  1.00  from holding CubicFarm Systems Corp or generate 16.67% return on investment over 90 days.

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

CubicFarm Systems Corp  vs.  Komatsu

CubicFarm Systems Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CubicFarm Systems Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CubicFarm Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Komatsu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Komatsu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CubicFarm Systems and Komatsu

The main advantage of trading using opposite CubicFarm Systems and Komatsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CubicFarm Systems 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 CubicFarm Systems Corp 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.