Correlation Between Makita Corp and Stanley Black

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

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

Diversification Opportunities for Makita Corp and Stanley Black

0.28

Correlation Coefficient

Makita Corp  Stanley Black

Modest diversification

The 3 months correlation between Makita and Stanley is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Makita Corp and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker 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 Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of Makita Corp i.e., Makita Corp and Stanley Black go up and down completely randomly.

Pair Corralation between Makita Corp and Stanley Black

If you would invest  2,720  in Makita Corp on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Makita Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

Makita Corp  vs.  Stanley Black Decker

Makita Corp

Risk-Adjusted Performance

0 of 100

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.

Stanley Black Decker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stanley Black Decker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Makita Corp and Stanley Black

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

The idea behind Makita Corp and Stanley Black Decker 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.