Correlation Between Itochu Corp and Agro Capital
Can any of the company-specific risk be diversified away by investing in both Itochu Corp 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 Corp 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 Corp ADR and Agro Capital Management, you can compare the effects of market volatilities on Itochu Corp 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 Corp with a short position of Agro Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itochu Corp and Agro Capital.
Diversification Opportunities for Itochu Corp and Agro Capital
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Itochu and Agro is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Itochu Corp ADR 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 Corp 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 Corp ADR 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 Corp i.e., Itochu Corp and Agro Capital go up and down completely randomly.
Pair Corralation between Itochu Corp and Agro Capital
Assuming the 90 days horizon Itochu Corp is expected to generate 17.45 times less return on investment than Agro Capital. But when comparing it to its historical volatility, Itochu Corp ADR is 17.14 times less risky than Agro Capital. It trades about 0.07 of its potential returns per unit of risk. Agro Capital Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.40 in Agro Capital Management on September 2, 2024 and sell it today you would lose (0.17) from holding Agro Capital Management or give up 7.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Itochu Corp ADR vs. Agro Capital Management
Performance |
| Timeline |
| Itochu Corp ADR |
| Agro Capital Management |
Itochu Corp and Agro Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itochu Corp and Agro Capital
The main advantage of trading using opposite Itochu Corp and Agro Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itochu Corp 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 Corp vs. Marubeni Corp ADR | Itochu Corp vs. Sumitomo Corp ADR | Itochu Corp vs. Mitsubishi Corp | Itochu Corp vs. Hitachi Ltd ADR |
| Agro Capital vs. Alliance Recovery | Agro Capital vs. Ayala | Agro Capital vs. Alaska Power Telephone | Agro Capital vs. Ayala Corp 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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