Correlation Between KOMATSU and GLOBUS MEDICAL

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

By analyzing existing cross correlation between KOMATSU LTD SPONS and GLOBUS MEDICAL A, you can compare the effects of market volatilities on KOMATSU and GLOBUS MEDICAL 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 GLOBUS MEDICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOMATSU and GLOBUS MEDICAL.

Diversification Opportunities for KOMATSU and GLOBUS MEDICAL

0.66

Correlation Coefficient

KOMATSU  GLOBUS MEDICAL

Poor diversification

The 3 months correlation between KOMATSU and GLOBUS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding KOMATSU LTD SPONS and GLOBUS MEDICAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBUS MEDICAL A 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 LTD SPONS are associated (or correlated) with GLOBUS MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBUS MEDICAL A has no effect on the direction of KOMATSU i.e., KOMATSU and GLOBUS MEDICAL go up and down completely randomly.

Pair Corralation between KOMATSU and GLOBUS MEDICAL

Assuming the 90 days trading horizon KOMATSU is expected to generate 2.4 times less return on investment than GLOBUS MEDICAL. But when comparing it to its historical volatility, KOMATSU LTD SPONS is 1.5 times less risky than GLOBUS MEDICAL. It trades about 0.1 of its potential returns per unit of risk. GLOBUS MEDICAL A is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  6,300  in GLOBUS MEDICAL A on September 23, 2024 and sell it today you would earn a total of  1,500  from holding GLOBUS MEDICAL A or generate 23.81% return on investment over 90 days.

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

KOMATSU LTD SPONS  vs.  GLOBUS MEDICAL A

KOMATSU LTD SPONS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KOMATSU LTD SPONS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, KOMATSU may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GLOBUS MEDICAL A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBUS MEDICAL A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GLOBUS MEDICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KOMATSU and GLOBUS MEDICAL

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

The idea behind KOMATSU LTD SPONS and GLOBUS MEDICAL A 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.