Correlation Between Snap On and Makita

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

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

Diversification Opportunities for Snap On and Makita

-0.46

Correlation Coefficient

Snap On  Makita

Very good diversification

The 3 months correlation between Snap and Makita is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita and Snap On 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 Snap On are associated (or correlated) with Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Snap On i.e., Snap On and Makita go up and down completely randomly.

Pair Corralation between Snap On and Makita

If you would invest  27,740  in Snap On on September 4, 2024 and sell it today you would earn a total of  8,948  from holding Snap On or generate 32.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.13%
Values	Daily Returns

Snap On  vs.  Makita

Snap On

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.

Makita

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Snap On and Makita

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

The idea behind Snap On and Makita 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.