Correlation Between Techtronic Industries and Makita

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

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

Diversification Opportunities for Techtronic Industries and Makita

0.59

Correlation Coefficient

Techtronic Industries  Makita

Very weak diversification

The 3 months correlation between Techtronic and Makita is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Techtronic Industries Ltd and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita and Techtronic Industries 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 Techtronic Industries Ltd 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 Techtronic Industries i.e., Techtronic Industries and Makita go up and down completely randomly.

Pair Corralation between Techtronic Industries and Makita

If you would invest  6,655  in Techtronic Industries Ltd on September 3, 2024 and sell it today you would earn a total of  443.00  from holding Techtronic Industries Ltd or generate 6.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.69%
Values	Daily Returns

Techtronic Industries Ltd  vs.  Makita

Techtronic Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Techtronic Industries Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Techtronic Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Techtronic Industries and Makita

The main advantage of trading using opposite Techtronic Industries and Makita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Techtronic Industries 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 Techtronic Industries Ltd 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.