Correlation Between Shimano and Canlan Ice

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

By analyzing existing cross correlation between Shimano Inc ADR and Canlan Ice Sports, you can compare the effects of market volatilities on Shimano and Canlan Ice 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 Canlan Ice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Canlan Ice.

Diversification Opportunities for Shimano and Canlan Ice

-0.62

Correlation Coefficient

Shimano  Canlan Ice

Excellent diversification

The 3 months correlation between Shimano and Canlan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Inc ADR are associated (or correlated) with Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Shimano i.e., Shimano and Canlan Ice go up and down completely randomly.

Pair Corralation between Shimano and Canlan Ice

Assuming the 90 days horizon Shimano Inc ADR is expected to under-perform the Canlan Ice. In addition to that, Shimano is 11.2 times more volatile than Canlan Ice Sports. It trades about -0.27 of its total potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.17 per unit of volatility. If you would invest  292.00  in Canlan Ice Sports on September 23, 2024 and sell it today you would earn a total of  5.00  from holding Canlan Ice Sports or generate 1.71% return on investment over 90 days.

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

Shimano Inc ADR  vs.  Canlan Ice Sports

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 uncertain 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.

Canlan Ice Sports

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shimano and Canlan Ice

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

The idea behind Shimano Inc ADR and Canlan Ice Sports 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.