Correlation Between SYSTEMAIR and Tokyo Gas

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

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

Diversification Opportunities for SYSTEMAIR and Tokyo Gas

0.77

Correlation Coefficient

SYSTEMAIR  Tokyo Gas

Poor diversification

The 3 months correlation between SYSTEMAIR and Tokyo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SYSTEMAIR AB and Tokyo Gas CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Gas CoLtd and SYSTEMAIR 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 SYSTEMAIR AB are associated (or correlated) with Tokyo Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Gas CoLtd has no effect on the direction of SYSTEMAIR i.e., SYSTEMAIR and Tokyo Gas go up and down completely randomly.

Pair Corralation between SYSTEMAIR and Tokyo Gas

Assuming the 90 days trading horizon SYSTEMAIR is expected to generate 15.13 times less return on investment than Tokyo Gas. In addition to that, SYSTEMAIR is 1.03 times more volatile than Tokyo Gas CoLtd. It trades about 0.01 of its total potential returns per unit of risk. Tokyo Gas CoLtd is currently generating about 0.2 per unit of volatility. If you would invest  1,910  in Tokyo Gas CoLtd on October 26, 2024 and sell it today you would earn a total of  610.00  from holding Tokyo Gas CoLtd or generate 31.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

SYSTEMAIR AB  vs.  Tokyo Gas CoLtd

SYSTEMAIR AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SYSTEMAIR AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SYSTEMAIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tokyo Gas CoLtd

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Gas CoLtd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tokyo Gas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SYSTEMAIR and Tokyo Gas

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

The idea behind SYSTEMAIR AB and Tokyo Gas CoLtd 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.