Correlation Between Sanyo Chemical and First American
Can any of the company-specific risk be diversified away by investing in both Sanyo Chemical and First American 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 Sanyo Chemical and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sanyo Chemical Industries and First American Financial, you can compare the effects of market volatilities on Sanyo Chemical and First American 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 Sanyo Chemical with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanyo Chemical and First American.
Diversification Opportunities for Sanyo Chemical and First American
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sanyo and First is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Sanyo Chemical Industries and First American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Financial and Sanyo Chemical 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 Sanyo Chemical Industries are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Financial has no effect on the direction of Sanyo Chemical i.e., Sanyo Chemical and First American go up and down completely randomly.
Pair Corralation between Sanyo Chemical and First American
Assuming the 90 days horizon Sanyo Chemical Industries is expected to under-perform the First American. But the stock apears to be less risky and, when comparing its historical volatility, Sanyo Chemical Industries is 1.29 times less risky than First American. The stock trades about -0.04 of its potential returns per unit of risk. The First American Financial is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 5,950 in First American Financial on October 24, 2024 and sell it today you would lose (50.00) from holding First American Financial or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sanyo Chemical Industries vs. First American Financial
Performance |
| Timeline |
| Sanyo Chemical Industries |
| First American Financial |
Sanyo Chemical and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sanyo Chemical and First American
The main advantage of trading using opposite Sanyo Chemical and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanyo Chemical position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Sanyo Chemical vs. Darden Restaurants | Sanyo Chemical vs. CeoTronics AG | Sanyo Chemical vs. LANDSEA GREEN MANAGEMENT | Sanyo Chemical vs. Fevertree Drinks PLC |
| First American vs. SALESFORCE INC CDR | First American vs. FLOW TRADERS LTD | First American vs. CHIBA BANK | First American vs. AUTO TRADER 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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