Correlation Between Lindsay and Komatsu

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

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

Diversification Opportunities for Lindsay and Komatsu

0.35

Correlation Coefficient

Lindsay  Komatsu

Weak diversification

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

Pair Corralation between Lindsay and Komatsu

Considering the 90-day investment horizon Lindsay is expected to under-perform the Komatsu. In addition to that, Lindsay is 1.35 times more volatile than Komatsu. It trades about -0.02 of its total potential returns per unit of risk. Komatsu is currently generating about 0.03 per unit of volatility. If you would invest  2,304  in Komatsu on October 4, 2024 and sell it today you would earn a total of  428.00  from holding Komatsu or generate 18.58% return on investment over 90 days.

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

Lindsay  vs.  Komatsu

Lindsay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lindsay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lindsay is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Komatsu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lindsay and Komatsu

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

The idea behind Lindsay and Komatsu 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.