Correlation Between Shimano and Oriental Land

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

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

Diversification Opportunities for Shimano and Oriental Land

0.02

Correlation Coefficient

Shimano  Oriental Land

Significant diversification

The 3 months correlation between Shimano and Oriental is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shimano and Oriental Land Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Land and Shimano 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 Shimano are associated (or correlated) with Oriental Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Land has no effect on the direction of Shimano i.e., Shimano and Oriental Land go up and down completely randomly.

Pair Corralation between Shimano and Oriental Land

Assuming the 90 days horizon Shimano is expected to generate 1.24 times more return on investment than Oriental Land. However, Shimano is 1.24 times more volatile than Oriental Land Co. It trades about 0.09 of its potential returns per unit of risk. Oriental Land Co is currently generating about -0.04 per unit of risk. If you would invest  12,875  in Shimano on December 27, 2024 and sell it today you would earn a total of  1,436  from holding Shimano or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Shimano  vs.  Oriental Land Co

Shimano

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Shimano reported solid returns over the last few months and may actually be approaching a breakup point.

Oriental Land

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shimano and Oriental Land

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

The idea behind Shimano and Oriental Land Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .