Correlation Between ITOCHU and Agro Capital
Can any of the company-specific risk be diversified away by investing in both ITOCHU and Agro Capital 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 Agro Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITOCHU and Agro Capital Management, you can compare the effects of market volatilities on ITOCHU and Agro Capital 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 Agro Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and Agro Capital.
Diversification Opportunities for ITOCHU and Agro Capital
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ITOCHU and Agro is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and Agro Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agro Capital Management 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 Agro Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agro Capital Management has no effect on the direction of ITOCHU i.e., ITOCHU and Agro Capital go up and down completely randomly.
Pair Corralation between ITOCHU and Agro Capital
Assuming the 90 days horizon ITOCHU is expected to generate 12.9 times less return on investment than Agro Capital. But when comparing it to its historical volatility, ITOCHU is 6.51 times less risky than Agro Capital. It trades about 0.08 of its potential returns per unit of risk. Agro Capital Management is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1.49 in Agro Capital Management on August 25, 2024 and sell it today you would earn a total of 0.39 from holding Agro Capital Management or generate 26.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
ITOCHU vs. Agro Capital Management
Performance |
| Timeline |
| ITOCHU |
| Agro Capital Management |
ITOCHU and Agro Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITOCHU and Agro Capital
The main advantage of trading using opposite ITOCHU and Agro Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU position performs unexpectedly, Agro Capital 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 Agro Capital will offset losses from the drop in Agro Capital's long position.| ITOCHU vs. Sumitomo Corp ADR | ITOCHU vs. Mitsui Co | ITOCHU vs. Marubeni Corp ADR | ITOCHU vs. Mitsubishi Corp |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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