Correlation Between Shimano and Sportsquest

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

Diversification Opportunities for Shimano and Sportsquest

-0.39

Correlation Coefficient

Shimano  Sportsquest

Very good diversification

The 3 months correlation between Shimano and Sportsquest is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Sportsquest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsquest 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 Sportsquest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsquest has no effect on the direction of Shimano i.e., Shimano and Sportsquest go up and down completely randomly.

Pair Corralation between Shimano and Sportsquest

Assuming the 90 days horizon Shimano is expected to generate 35.53 times less return on investment than Sportsquest. But when comparing it to its historical volatility, Shimano Inc ADR is 18.02 times less risky than Sportsquest. It trades about 0.05 of its potential returns per unit of risk. Sportsquest is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Sportsquest on December 30, 2024 and sell it today you would lose (0.01) from holding Sportsquest or give up 50.0% of portfolio value over 90 days.

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

Shimano Inc ADR  vs.  Sportsquest

Shimano Inc ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano Inc ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Shimano is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sportsquest

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sportsquest are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sportsquest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shimano and Sportsquest

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

The idea behind Shimano Inc ADR and Sportsquest 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..