Correlation Between Terex and Kubota

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

By analyzing existing cross correlation between Terex and Kubota, you can compare the effects of market volatilities on Terex and Kubota 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terex and Kubota.

Diversification Opportunities for Terex and Kubota

-0.56

Correlation Coefficient

Terex  Kubota

Excellent diversification

The 3 months correlation between Terex and Kubota is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Terex and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Terex i.e., Terex and Kubota go up and down completely randomly.

Pair Corralation between Terex and Kubota

Assuming the 90 days horizon Terex is expected to generate 2.01 times more return on investment than Kubota. However, Terex is 2.01 times more volatile than Kubota. It trades about 0.17 of its potential returns per unit of risk. Kubota is currently generating about -0.05 per unit of risk. If you would invest  2,987  in Terex on April 23, 2025 and sell it today you would earn a total of  1,086  from holding Terex or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Terex  vs.  Kubota

Terex

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Terex are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Terex reported solid returns over the last few months and may actually be approaching a breakup point.

Kubota

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kubota has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kubota is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Terex and Kubota

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

The idea behind Terex and Kubota 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.