Correlation Between Makita and MISUMI GROUP

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

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

Diversification Opportunities for Makita and MISUMI GROUP

0.68

Correlation Coefficient

Makita  MISUMI GROUP

Poor diversification

The 3 months correlation between Makita and MISUMI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Makita and MISUMI GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MISUMI GROUP INC and Makita 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 Makita are associated (or correlated) with MISUMI GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MISUMI GROUP INC has no effect on the direction of Makita i.e., Makita and MISUMI GROUP go up and down completely randomly.

Pair Corralation between Makita and MISUMI GROUP

Assuming the 90 days trading horizon Makita is expected to generate 0.93 times more return on investment than MISUMI GROUP. However, Makita is 1.08 times less risky than MISUMI GROUP. It trades about 0.11 of its potential returns per unit of risk. MISUMI GROUP INC is currently generating about 0.06 per unit of risk. If you would invest  2,862  in Makita on December 22, 2024 and sell it today you would earn a total of  424.00  from holding Makita or generate 14.81% return on investment over 90 days.

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

Makita  vs.  MISUMI GROUP INC

Makita

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Makita are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Makita reported solid returns over the last few months and may actually be approaching a breakup point.

MISUMI GROUP INC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MISUMI GROUP INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MISUMI GROUP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Makita and MISUMI GROUP

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

The idea behind Makita and MISUMI GROUP INC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.