Correlation Between ITOCHU and Seaboard
Can any of the company-specific risk be diversified away by investing in both ITOCHU and Seaboard 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 ITOCHU and Seaboard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITOCHU and Seaboard, you can compare the effects of market volatilities on ITOCHU and Seaboard 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 ITOCHU with a short position of Seaboard. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and Seaboard.
Diversification Opportunities for ITOCHU and Seaboard
Average diversification
The 3 months correlation between ITOCHU and Seaboard is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard and ITOCHU 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 ITOCHU are associated (or correlated) with Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of ITOCHU i.e., ITOCHU and Seaboard go up and down completely randomly.
Pair Corralation between ITOCHU and Seaboard
Assuming the 90 days horizon ITOCHU is expected to generate 1.33 times more return on investment than Seaboard. However, ITOCHU is 1.33 times more volatile than Seaboard. It trades about -0.06 of its potential returns per unit of risk. Seaboard is currently generating about -0.29 per unit of risk. If you would invest 4,724 in ITOCHU on September 24, 2024 and sell it today you would lose (101.00) from holding ITOCHU or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITOCHU vs. Seaboard
Performance |
| Timeline |
| ITOCHU |
| Seaboard |
ITOCHU and Seaboard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITOCHU and Seaboard
The main advantage of trading using opposite ITOCHU and Seaboard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU position performs unexpectedly, Seaboard 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 Seaboard will offset losses from the drop in Seaboard's long position.The idea behind ITOCHU and Seaboard 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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