Correlation Between Terex and KUBOTA CORP

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

By analyzing existing cross correlation between Terex and KUBOTA P ADR20, you can compare the effects of market volatilities on Terex and KUBOTA 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 Terex with a short position of KUBOTA CORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terex and KUBOTA CORP.

Diversification Opportunities for Terex and KUBOTA CORP

-0.24

Correlation Coefficient

Terex  KUBOTA CORP

Very good diversification

The 3 months correlation between Terex and KUBOTA is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Terex and KUBOTA P ADR20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KUBOTA P ADR20 and Terex 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 Terex are associated (or correlated) with KUBOTA CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KUBOTA P ADR20 has no effect on the direction of Terex i.e., Terex and KUBOTA CORP go up and down completely randomly.

Pair Corralation between Terex and KUBOTA CORP

Assuming the 90 days horizon Terex is expected to under-perform the KUBOTA CORP. In addition to that, Terex is 1.11 times more volatile than KUBOTA P ADR20. It trades about -0.1 of its total potential returns per unit of risk. KUBOTA P ADR20 is currently generating about 0.07 per unit of volatility. If you would invest  5,450  in KUBOTA P ADR20 on December 29, 2024 and sell it today you would earn a total of  450.00  from holding KUBOTA P ADR20 or generate 8.26% return on investment over 90 days.

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

Terex  vs.  KUBOTA P ADR20

Terex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KUBOTA P ADR20

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KUBOTA P ADR20 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KUBOTA CORP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Terex and KUBOTA CORP

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

The idea behind Terex and KUBOTA P ADR20 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.