Correlation Between DENSO CORP and Cullen/Frost Bankers

Can any of the company-specific risk be diversified away by investing in both DENSO CORP and Cullen/Frost Bankers 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 Cullen/Frost Bankers 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 CullenFrost Bankers, you can compare the effects of market volatilities on DENSO CORP and Cullen/Frost Bankers 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 Cullen/Frost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO CORP and Cullen/Frost Bankers.

Diversification Opportunities for DENSO CORP and Cullen/Frost Bankers

0.47

Correlation Coefficient

DENSO CORP  Cullen/Frost Bankers

Very weak diversification

The 3 months correlation between DENSO and Cullen/Frost is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding DENSO P ADR and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen/Frost Bankers 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 Cullen/Frost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen/Frost Bankers has no effect on the direction of DENSO CORP i.e., DENSO CORP and Cullen/Frost Bankers go up and down completely randomly.

Pair Corralation between DENSO CORP and Cullen/Frost Bankers

Assuming the 90 days trading horizon DENSO P ADR is expected to under-perform the Cullen/Frost Bankers. In addition to that, DENSO CORP is 1.29 times more volatile than CullenFrost Bankers. It trades about -0.01 of its total potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.16 per unit of volatility. If you would invest  8,853  in CullenFrost Bankers on October 4, 2024 and sell it today you would earn a total of  4,047  from holding CullenFrost Bankers or generate 45.71% return on investment over 90 days.

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

DENSO P ADR  vs.  CullenFrost Bankers

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.

Cullen/Frost Bankers

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CullenFrost Bankers are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cullen/Frost Bankers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DENSO CORP and Cullen/Frost Bankers

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

The idea behind DENSO P ADR and CullenFrost Bankers 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..