Correlation Between SiteOne Landscape and Obayashi

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

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

Diversification Opportunities for SiteOne Landscape and Obayashi

0.07

Correlation Coefficient

SiteOne Landscape  Obayashi

Significant diversification

The 3 months correlation between SiteOne and Obayashi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding SiteOne Landscape Supply and Obayashi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Obayashi and SiteOne Landscape 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 SiteOne Landscape Supply are associated (or correlated) with Obayashi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Obayashi has no effect on the direction of SiteOne Landscape i.e., SiteOne Landscape and Obayashi go up and down completely randomly.

Pair Corralation between SiteOne Landscape and Obayashi

Given the investment horizon of 90 days SiteOne Landscape Supply is expected to under-perform the Obayashi. In addition to that, SiteOne Landscape is 1.23 times more volatile than Obayashi. It trades about -0.09 of its total potential returns per unit of risk. Obayashi is currently generating about -0.02 per unit of volatility. If you would invest  1,336  in Obayashi on September 22, 2024 and sell it today you would lose (16.00) from holding Obayashi or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

SiteOne Landscape Supply  vs.  Obayashi

SiteOne Landscape Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SiteOne Landscape Supply has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Obayashi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Obayashi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SiteOne Landscape and Obayashi

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

The idea behind SiteOne Landscape Supply and Obayashi 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.