Correlation Between ITOCHU and Itochu Corp
Can any of the company-specific risk be diversified away by investing in both ITOCHU 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 ITOCHU and Itochu Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITOCHU and Itochu Corp ADR, you can compare the effects of market volatilities on ITOCHU 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 ITOCHU with a short position of Itochu Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and Itochu Corp.
Diversification Opportunities for ITOCHU and Itochu Corp
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ITOCHU and Itochu is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU 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 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 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 ITOCHU i.e., ITOCHU and Itochu Corp go up and down completely randomly.
Pair Corralation between ITOCHU and Itochu Corp
Assuming the 90 days horizon ITOCHU is expected to under-perform the Itochu Corp. In addition to that, ITOCHU is 3.53 times more volatile than Itochu Corp ADR. It trades about -0.03 of its total potential returns per unit of risk. Itochu Corp ADR is currently generating about 0.0 per unit of volatility. If you would invest 9,895 in Itochu Corp ADR on August 28, 2024 and sell it today you would lose (4.00) from holding Itochu Corp ADR or give up 0.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITOCHU vs. Itochu Corp ADR
Performance |
| Timeline |
| ITOCHU |
| Itochu Corp ADR |
ITOCHU and Itochu Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITOCHU and Itochu Corp
The main advantage of trading using opposite ITOCHU and Itochu Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU 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.| ITOCHU vs. Sumitomo Corp ADR | ITOCHU vs. Mitsui Co | ITOCHU vs. Marubeni Corp ADR | ITOCHU vs. Mitsubishi Corp |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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