Correlation Between SMC Corp and Fanuc

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

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

Diversification Opportunities for SMC Corp and Fanuc

0.27

Correlation Coefficient

SMC Corp  Fanuc

Modest diversification

The 3 months correlation between SMC and Fanuc is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and SMC 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 SMC Corp are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of SMC Corp i.e., SMC Corp and Fanuc go up and down completely randomly.

Pair Corralation between SMC Corp and Fanuc

Assuming the 90 days horizon SMC Corp is expected to generate 0.37 times more return on investment than Fanuc. However, SMC Corp is 2.72 times less risky than Fanuc. It trades about -0.01 of its potential returns per unit of risk. Fanuc is currently generating about -0.02 per unit of risk. If you would invest  43,547  in SMC Corp on September 3, 2024 and sell it today you would lose (947.00) from holding SMC Corp or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SMC Corp  vs.  Fanuc

SMC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Fanuc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SMC Corp and Fanuc

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

The idea behind SMC Corp and Fanuc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.