Correlation Between Shimadzu and Coherent

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

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

Diversification Opportunities for Shimadzu and Coherent

0.69

Correlation Coefficient

Shimadzu  Coherent

Poor diversification

The 3 months correlation between Shimadzu and Coherent is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shimadzu and Coherent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coherent and Shimadzu 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 Shimadzu are associated (or correlated) with Coherent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coherent has no effect on the direction of Shimadzu i.e., Shimadzu and Coherent go up and down completely randomly.

Pair Corralation between Shimadzu and Coherent

Assuming the 90 days horizon Shimadzu is expected to under-perform the Coherent. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shimadzu is 2.94 times less risky than Coherent. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Coherent is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,458  in Coherent on September 19, 2024 and sell it today you would earn a total of  6,275  from holding Coherent or generate 181.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Shimadzu  vs.  Coherent

Shimadzu

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shimadzu are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Shimadzu is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Coherent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coherent are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Coherent reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shimadzu and Coherent

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

The idea behind Shimadzu and Coherent 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.