Correlation Between Komatsu and AmeraMex International

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

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

Diversification Opportunities for Komatsu and AmeraMex International

-0.3

Correlation Coefficient

Komatsu  AmeraMex International

Very good diversification

The 3 months correlation between Komatsu and AmeraMex is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Komatsu and AmeraMex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmeraMex International and Komatsu 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 Komatsu are associated (or correlated) with AmeraMex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmeraMex International has no effect on the direction of Komatsu i.e., Komatsu and AmeraMex International go up and down completely randomly.

Pair Corralation between Komatsu and AmeraMex International

Assuming the 90 days horizon Komatsu is expected to generate 0.26 times more return on investment than AmeraMex International. However, Komatsu is 3.84 times less risky than AmeraMex International. It trades about 0.12 of its potential returns per unit of risk. AmeraMex International is currently generating about 0.0 per unit of risk. If you would invest  2,720  in Komatsu on December 2, 2024 and sell it today you would earn a total of  275.00  from holding Komatsu or generate 10.11% return on investment over 90 days.

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

Komatsu  vs.  AmeraMex International

Komatsu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Komatsu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AmeraMex International

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Komatsu and AmeraMex International

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

The idea behind Komatsu and AmeraMex International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.