Correlation Between Peloton Interactive and Shimano

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

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

Diversification Opportunities for Peloton Interactive and Shimano

-0.88

Correlation Coefficient

Peloton Interactive  Shimano

Pay attention - limited upside

The 3 months correlation between Peloton and Shimano is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Peloton Interactive and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR and Peloton Interactive 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 Peloton Interactive are associated (or correlated) with Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Peloton Interactive i.e., Peloton Interactive and Shimano go up and down completely randomly.

Pair Corralation between Peloton Interactive and Shimano

Given the investment horizon of 90 days Peloton Interactive is expected to generate 3.49 times more return on investment than Shimano. However, Peloton Interactive is 3.49 times more volatile than Shimano Inc ADR. It trades about 0.21 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.24 per unit of risk. If you would invest  472.00  in Peloton Interactive on September 14, 2024 and sell it today you would earn a total of  463.00  from holding Peloton Interactive or generate 98.09% return on investment over 90 days.

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

Peloton Interactive  vs.  Shimano Inc ADR

Peloton Interactive

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Peloton Interactive are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Peloton Interactive displayed solid returns over the last few months and may actually be approaching a breakup point.

Shimano Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shimano Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Peloton Interactive and Shimano

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

The idea behind Peloton Interactive and Shimano Inc ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.