Correlation Between Vestas Wind and Fanuc

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

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

Diversification Opportunities for Vestas Wind and Fanuc

0.26

Correlation Coefficient

Vestas Wind  Fanuc

Modest diversification

The 3 months correlation between Vestas and Fanuc is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Fanuc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanuc and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Fanuc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanuc has no effect on the direction of Vestas Wind i.e., Vestas Wind and Fanuc go up and down completely randomly.

Pair Corralation between Vestas Wind and Fanuc

Assuming the 90 days horizon Vestas Wind is expected to generate 1.88 times less return on investment than Fanuc. But when comparing it to its historical volatility, Vestas Wind Systems is 1.62 times less risky than Fanuc. It trades about 0.05 of its potential returns per unit of risk. Fanuc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,512  in Fanuc on December 29, 2024 and sell it today you would earn a total of  244.00  from holding Fanuc or generate 9.71% return on investment over 90 days.

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

Vestas Wind Systems  vs.  Fanuc

Vestas Wind Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vestas Wind Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vestas Wind may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Fanuc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fanuc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fanuc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vestas Wind and Fanuc

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

The idea behind Vestas Wind Systems and Fanuc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.