Correlation Between Makita and Techtronic Industries

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

By analyzing existing cross correlation between Makita and Techtronic Industries Ltd, you can compare the effects of market volatilities on Makita and Techtronic Industries 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 Techtronic Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Makita and Techtronic Industries.

Diversification Opportunities for Makita and Techtronic Industries

0.59

Correlation Coefficient

Makita  Techtronic Industries

Very weak diversification

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

Pair Corralation between Makita and Techtronic Industries

If you would invest  2,729  in Makita on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Makita or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Makita  vs.  Techtronic Industries Ltd

Makita

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makita has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Makita is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Techtronic Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Techtronic Industries Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Techtronic Industries may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Makita and Techtronic Industries

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

The idea behind Makita and Techtronic Industries Ltd 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.