Correlation Between DENSO CORP and Addtech AB

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

By analyzing existing cross correlation between DENSO P ADR and Addtech AB, you can compare the effects of market volatilities on DENSO CORP and Addtech AB 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 DENSO CORP with a short position of Addtech AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO CORP and Addtech AB.

Diversification Opportunities for DENSO CORP and Addtech AB

-0.01

Correlation Coefficient

DENSO CORP  Addtech AB

Good diversification

The 3 months correlation between DENSO and Addtech is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding DENSO P ADR and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB and DENSO CORP 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 DENSO P ADR are associated (or correlated) with Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of DENSO CORP i.e., DENSO CORP and Addtech AB go up and down completely randomly.

Pair Corralation between DENSO CORP and Addtech AB

Assuming the 90 days trading horizon DENSO CORP is expected to generate 3.59 times less return on investment than Addtech AB. But when comparing it to its historical volatility, DENSO P ADR is 1.12 times less risky than Addtech AB. It trades about 0.03 of its potential returns per unit of risk. Addtech AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,079  in Addtech AB on October 4, 2024 and sell it today you would earn a total of  1,541  from holding Addtech AB or generate 142.82% return on investment over 90 days.

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

DENSO P ADR  vs.  Addtech AB

DENSO P ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DENSO P ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DENSO CORP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Addtech AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Addtech AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Addtech AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DENSO CORP and Addtech AB

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

The idea behind DENSO P ADR and Addtech AB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.