Correlation Between ITOCHU and Halma PLC
Can any of the company-specific risk be diversified away by investing in both ITOCHU and Halma PLC 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 Halma PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITOCHU and Halma PLC, you can compare the effects of market volatilities on ITOCHU and Halma PLC 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 Halma PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and Halma PLC.
Diversification Opportunities for ITOCHU and Halma PLC
Modest diversification
The 3 months correlation between ITOCHU and Halma is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and Halma PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma PLC 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 Halma PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma PLC has no effect on the direction of ITOCHU i.e., ITOCHU and Halma PLC go up and down completely randomly.
Pair Corralation between ITOCHU and Halma PLC
Assuming the 90 days horizon ITOCHU is expected to generate 1.61 times more return on investment than Halma PLC. However, ITOCHU is 1.61 times more volatile than Halma PLC. It trades about 0.05 of its potential returns per unit of risk. Halma PLC is currently generating about 0.05 per unit of risk. If you would invest 3,572 in ITOCHU on September 3, 2024 and sell it today you would earn a total of 1,553 from holding ITOCHU or generate 43.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.39% |
| Values | Daily Returns |
ITOCHU vs. Halma PLC
Performance |
| Timeline |
| ITOCHU |
| Halma PLC |
ITOCHU and Halma PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITOCHU and Halma PLC
The main advantage of trading using opposite ITOCHU and Halma PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU position performs unexpectedly, Halma PLC 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 Halma PLC will offset losses from the drop in Halma PLC's long position.| ITOCHU vs. Sumitomo Corp ADR | ITOCHU vs. Mitsui Co | ITOCHU vs. Marubeni Corp ADR | ITOCHU vs. Mitsubishi Corp |
| Halma PLC vs. Grupo Bimbo SAB | Halma PLC vs. Grupo Financiero Inbursa | Halma PLC vs. Becle SA de | Halma PLC vs. HUMANA INC |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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