Correlation Between Power Assets and Itochu Corp
Can any of the company-specific risk be diversified away by investing in both Power Assets and Itochu 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 Power Assets and Itochu Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Assets Holdings and Itochu Corp ADR, you can compare the effects of market volatilities on Power Assets and Itochu 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 Power Assets with a short position of Itochu Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Assets and Itochu Corp.
Diversification Opportunities for Power Assets and Itochu Corp
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Power and Itochu is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings and Itochu Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itochu Corp ADR and Power Assets 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 Power Assets Holdings are associated (or correlated) with Itochu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itochu Corp ADR has no effect on the direction of Power Assets i.e., Power Assets and Itochu Corp go up and down completely randomly.
Pair Corralation between Power Assets and Itochu Corp
Assuming the 90 days horizon Power Assets Holdings is expected to generate 0.83 times more return on investment than Itochu Corp. However, Power Assets Holdings is 1.21 times less risky than Itochu Corp. It trades about -0.05 of its potential returns per unit of risk. Itochu Corp ADR is currently generating about -0.11 per unit of risk. If you would invest 665.00 in Power Assets Holdings on August 26, 2024 and sell it today you would lose (20.00) from holding Power Assets Holdings or give up 3.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Assets Holdings vs. Itochu Corp ADR
Performance |
| Timeline |
| Power Assets Holdings |
| Itochu Corp ADR |
Power Assets and Itochu Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Assets and Itochu Corp
The main advantage of trading using opposite Power Assets and Itochu Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Assets position performs unexpectedly, Itochu 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 Itochu Corp will offset losses from the drop in Itochu Corp's long position.| Power Assets vs. TransAlta Corp | Power Assets vs. Pampa Energia SA | Power Assets vs. Vistra Energy Corp | Power Assets vs. NRG Energy |
| Itochu Corp vs. Marubeni Corp ADR | Itochu Corp vs. Sumitomo Corp ADR | Itochu Corp vs. Mitsubishi Corp | Itochu Corp vs. Hitachi Ltd ADR |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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