Correlation Between Kawasaki Heavy and Dear Cashmere

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

By analyzing existing cross correlation between Kawasaki Heavy Industries and Dear Cashmere Holding, you can compare the effects of market volatilities on Kawasaki Heavy and Dear Cashmere 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 Kawasaki Heavy with a short position of Dear Cashmere. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kawasaki Heavy and Dear Cashmere.

Diversification Opportunities for Kawasaki Heavy and Dear Cashmere

-0.59

Correlation Coefficient

Kawasaki Heavy  Dear Cashmere

Excellent diversification

The 3 months correlation between Kawasaki and Dear is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kawasaki Heavy Industries and Dear Cashmere Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dear Cashmere Holding and Kawasaki Heavy 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 Kawasaki Heavy Industries are associated (or correlated) with Dear Cashmere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dear Cashmere Holding has no effect on the direction of Kawasaki Heavy i.e., Kawasaki Heavy and Dear Cashmere go up and down completely randomly.

Pair Corralation between Kawasaki Heavy and Dear Cashmere

Assuming the 90 days horizon Kawasaki Heavy Industries is expected to generate 0.25 times more return on investment than Dear Cashmere. However, Kawasaki Heavy Industries is 4.06 times less risky than Dear Cashmere. It trades about 0.19 of its potential returns per unit of risk. Dear Cashmere Holding is currently generating about -0.02 per unit of risk. If you would invest  1,870  in Kawasaki Heavy Industries on December 26, 2024 and sell it today you would earn a total of  675.00  from holding Kawasaki Heavy Industries or generate 36.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Kawasaki Heavy Industries  vs.  Dear Cashmere Holding

Kawasaki Heavy Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasaki Heavy Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Kawasaki Heavy showed solid returns over the last few months and may actually be approaching a breakup point.

Dear Cashmere Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dear Cashmere Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Kawasaki Heavy and Dear Cashmere

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

The idea behind Kawasaki Heavy Industries and Dear Cashmere Holding 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.