Correlation Between Yageo Corp and ITEQ Corp

Can any of the company-specific risk be diversified away by investing in both Yageo Corp and ITEQ 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 Yageo Corp and ITEQ Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yageo Corp and ITEQ Corp, you can compare the effects of market volatilities on Yageo Corp and ITEQ 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 Yageo Corp with a short position of ITEQ Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yageo Corp and ITEQ Corp.

Diversification Opportunities for Yageo Corp and ITEQ Corp

-0.52

Correlation Coefficient

Yageo Corp  ITEQ Corp

Excellent diversification

The 3 months correlation between Yageo and ITEQ is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Yageo Corp and ITEQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITEQ Corp and Yageo 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 Yageo Corp are associated (or correlated) with ITEQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITEQ Corp has no effect on the direction of Yageo Corp i.e., Yageo Corp and ITEQ Corp go up and down completely randomly.

Pair Corralation between Yageo Corp and ITEQ Corp

Assuming the 90 days trading horizon Yageo Corp is expected to under-perform the ITEQ Corp. But the stock apears to be less risky and, when comparing its historical volatility, Yageo Corp is 1.08 times less risky than ITEQ Corp. The stock trades about -0.15 of its potential returns per unit of risk. The ITEQ Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,480  in ITEQ Corp on September 16, 2024 and sell it today you would earn a total of  280.00  from holding ITEQ Corp or generate 3.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Yageo Corp  vs.  ITEQ Corp

Yageo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yageo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

ITEQ Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITEQ Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, ITEQ Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Yageo Corp and ITEQ Corp

The main advantage of trading using opposite Yageo Corp and ITEQ Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yageo Corp position performs unexpectedly, ITEQ 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 ITEQ Corp will offset losses from the drop in ITEQ Corp's long position.

The idea behind Yageo Corp and ITEQ Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.