Correlation Between Shimano and Nikon Corp

Can any of the company-specific risk be diversified away by investing in both Shimano and Nikon Corp 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 Nikon Corp 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 Nikon Corp, you can compare the effects of market volatilities on Shimano and Nikon Corp 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 Nikon Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Nikon Corp.

Diversification Opportunities for Shimano and Nikon Corp

0.42

Correlation Coefficient

Shimano  Nikon Corp

Very weak diversification

The 3 months correlation between Shimano and Nikon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Nikon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nikon Corp 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 Nikon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nikon Corp has no effect on the direction of Shimano i.e., Shimano and Nikon Corp go up and down completely randomly.

Pair Corralation between Shimano and Nikon Corp

Assuming the 90 days horizon Shimano Inc ADR is expected to generate 0.57 times more return on investment than Nikon Corp. However, Shimano Inc ADR is 1.76 times less risky than Nikon Corp. It trades about 0.09 of its potential returns per unit of risk. Nikon Corp is currently generating about 0.02 per unit of risk. If you would invest  1,360  in Shimano Inc ADR on December 26, 2024 and sell it today you would earn a total of  116.00  from holding Shimano Inc ADR or generate 8.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Shimano Inc ADR  vs.  Nikon Corp

Shimano Inc ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano Inc ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Shimano may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Nikon Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nikon Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Nikon Corp 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 Nikon Corp

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

The idea behind Shimano Inc ADR and Nikon Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.