Correlation Between Makita Corp and Snap On

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

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

Diversification Opportunities for Makita Corp and Snap On

0.0

Correlation Coefficient

Makita Corp  Snap On

Pay attention - limited upside

The 3 months correlation between Makita and Snap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Makita Corp and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On and Makita Corp 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 Corp are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Makita Corp i.e., Makita Corp and Snap On go up and down completely randomly.

Pair Corralation between Makita Corp and Snap On

If you would invest (100.00) in Makita Corp on December 20, 2024 and sell it today you would earn a total of  100.00  from holding Makita Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Makita Corp  vs.  Snap On

Makita Corp

Risk-Adjusted Performance

Very Weak

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

Snap On

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Makita Corp and Snap On

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

The idea behind Makita Corp and Snap On 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.

Check out your portfolio center.

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 Channel module to use Commodity Channel Index to analyze current equity momentum.