Correlation Between KOMATSU and PENINSULA ENERG

Can any of the company-specific risk be diversified away by investing in both KOMATSU and PENINSULA ENERG 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 PENINSULA ENERG 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 PENINSULA ENERG, you can compare the effects of market volatilities on KOMATSU and PENINSULA ENERG 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 PENINSULA ENERG. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOMATSU and PENINSULA ENERG.

Diversification Opportunities for KOMATSU and PENINSULA ENERG

-0.64

Correlation Coefficient

KOMATSU  PENINSULA ENERG

Excellent diversification

The 3 months correlation between KOMATSU and PENINSULA is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding KOMATSU LTD SPONS and PENINSULA ENERG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENINSULA ENERG 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 PENINSULA ENERG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENINSULA ENERG has no effect on the direction of KOMATSU i.e., KOMATSU and PENINSULA ENERG go up and down completely randomly.

Pair Corralation between KOMATSU and PENINSULA ENERG

Assuming the 90 days trading horizon KOMATSU is expected to generate 22.71 times less return on investment than PENINSULA ENERG. But when comparing it to its historical volatility, KOMATSU LTD SPONS is 24.59 times less risky than PENINSULA ENERG. It trades about 0.05 of its potential returns per unit of risk. PENINSULA ENERG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  152.00  in PENINSULA ENERG on September 22, 2024 and sell it today you would lose (75.00) from holding PENINSULA ENERG or give up 49.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

KOMATSU LTD SPONS  vs.  PENINSULA ENERG

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.

PENINSULA ENERG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENINSULA ENERG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with KOMATSU and PENINSULA ENERG

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

The idea behind KOMATSU LTD SPONS and PENINSULA ENERG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.