Correlation Between THK Co and Amada

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

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

Diversification Opportunities for THK Co and Amada

0.37

Correlation Coefficient

THK Co  Amada

Weak diversification

The 3 months correlation between THK and Amada is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding THK Co Ltd and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada and THK Co 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 THK Co Ltd are associated (or correlated) with Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of THK Co i.e., THK Co and Amada go up and down completely randomly.

Pair Corralation between THK Co and Amada

Assuming the 90 days horizon THK Co Ltd is expected to generate 7.99 times more return on investment than Amada. However, THK Co is 7.99 times more volatile than Amada Co. It trades about 0.08 of its potential returns per unit of risk. Amada Co is currently generating about 0.13 per unit of risk. If you would invest  1,171  in THK Co Ltd on December 28, 2024 and sell it today you would earn a total of  102.00  from holding THK Co Ltd or generate 8.71% return on investment over 90 days.

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

THK Co Ltd  vs.  Amada Co

THK Co

Risk-Adjusted Performance

Modest

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

Amada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amada Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Amada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with THK Co and Amada

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

The idea behind THK Co Ltd and Amada Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.