Correlation Between Steel Partners and Itochu Corp
Can any of the company-specific risk be diversified away by investing in both Steel Partners 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 Steel Partners and Itochu Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Partners Holdings and Itochu Corp ADR, you can compare the effects of market volatilities on Steel Partners 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 Steel Partners with a short position of Itochu Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Partners and Itochu Corp.
Diversification Opportunities for Steel Partners and Itochu Corp
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Steel and Itochu is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Steel Partners Holdings 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 Steel Partners 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 Steel Partners Holdings 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 Steel Partners i.e., Steel Partners and Itochu Corp go up and down completely randomly.
Pair Corralation between Steel Partners and Itochu Corp
Given the investment horizon of 90 days Steel Partners Holdings is expected to generate 2.9 times more return on investment than Itochu Corp. However, Steel Partners is 2.9 times more volatile than Itochu Corp ADR. It trades about 0.15 of its potential returns per unit of risk. Itochu Corp ADR is currently generating about -0.02 per unit of risk. If you would invest 3,997 in Steel Partners Holdings on September 1, 2024 and sell it today you would earn a total of 503.00 from holding Steel Partners Holdings or generate 12.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steel Partners Holdings vs. Itochu Corp ADR
Performance |
| Timeline |
| Steel Partners Holdings |
| Itochu Corp ADR |
Steel Partners and Itochu Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Partners and Itochu Corp
The main advantage of trading using opposite Steel Partners and Itochu Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Partners 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.| Steel Partners vs. Compass Diversified | Steel Partners vs. Compass Diversified | Steel Partners vs. Compass Diversified | Steel Partners vs. Tejon Ranch Co |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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