Correlation Between WD 40 and Tokio Marine

Can any of the company-specific risk be diversified away by investing in both WD 40 and Tokio Marine 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 WD 40 and Tokio Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WD 40 CO and Tokio Marine Holdings, you can compare the effects of market volatilities on WD 40 and Tokio Marine 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 WD 40 with a short position of Tokio Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of WD 40 and Tokio Marine.

Diversification Opportunities for WD 40 and Tokio Marine

0.64

Correlation Coefficient

WD 40  Tokio Marine

Poor diversification

The 3 months correlation between WD1 and Tokio is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WD 40 CO and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings and WD 40 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 WD 40 CO are associated (or correlated) with Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of WD 40 i.e., WD 40 and Tokio Marine go up and down completely randomly.

Pair Corralation between WD 40 and Tokio Marine

Assuming the 90 days trading horizon WD 40 CO is expected to under-perform the Tokio Marine. But the stock apears to be less risky and, when comparing its historical volatility, WD 40 CO is 1.58 times less risky than Tokio Marine. The stock trades about -0.56 of its potential returns per unit of risk. The Tokio Marine Holdings is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  3,660  in Tokio Marine Holdings on October 5, 2024 and sell it today you would lose (161.00) from holding Tokio Marine Holdings or give up 4.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

WD 40 CO  vs.  Tokio Marine Holdings

WD 40 CO

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 CO are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WD 40 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Tokio Marine Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tokio Marine Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tokio Marine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with WD 40 and Tokio Marine

The main advantage of trading using opposite WD 40 and Tokio Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WD 40 position performs unexpectedly, Tokio Marine 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 Tokio Marine will offset losses from the drop in Tokio Marine's long position.

The idea behind WD 40 CO and Tokio Marine Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.