Correlation Between Webuild SpA and Kajima Corp

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

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

Diversification Opportunities for Webuild SpA and Kajima Corp

-0.35

Correlation Coefficient

Webuild SpA  Kajima Corp

Very good diversification

The 3 months correlation between Webuild and Kajima is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Webuild SpA ADR and Kajima Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kajima Corp ADR and Webuild SpA 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 Webuild SpA ADR are associated (or correlated) with Kajima Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kajima Corp ADR has no effect on the direction of Webuild SpA i.e., Webuild SpA and Kajima Corp go up and down completely randomly.

Pair Corralation between Webuild SpA and Kajima Corp

Assuming the 90 days horizon Webuild SpA ADR is expected to generate 0.44 times more return on investment than Kajima Corp. However, Webuild SpA ADR is 2.26 times less risky than Kajima Corp. It trades about 0.15 of its potential returns per unit of risk. Kajima Corp ADR is currently generating about -0.01 per unit of risk. If you would invest  522.00  in Webuild SpA ADR on September 13, 2024 and sell it today you would earn a total of  67.00  from holding Webuild SpA ADR or generate 12.84% return on investment over 90 days.

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

Webuild SpA ADR  vs.  Kajima Corp ADR

Webuild SpA ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webuild SpA ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Webuild SpA showed solid returns over the last few months and may actually be approaching a breakup point.

Kajima Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kajima Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Kajima Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Webuild SpA and Kajima Corp

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

The idea behind Webuild SpA ADR and Kajima Corp 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 Stocks Directory module to find actively traded stocks across global markets.