Correlation Between AGF Management and ITOCHU

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

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

Diversification Opportunities for AGF Management and ITOCHU

-0.13

Correlation Coefficient

AGF Management  ITOCHU

Good diversification

The 3 months correlation between AGF and ITOCHU is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU and AGF Management 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 AGF Management Limited are associated (or correlated) with ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of AGF Management i.e., AGF Management and ITOCHU go up and down completely randomly.

Pair Corralation between AGF Management and ITOCHU

Assuming the 90 days horizon AGF Management Limited is expected to under-perform the ITOCHU. But the stock apears to be less risky and, when comparing its historical volatility, AGF Management Limited is 1.31 times less risky than ITOCHU. The stock trades about -0.02 of its potential returns per unit of risk. The ITOCHU is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,776  in ITOCHU on September 16, 2024 and sell it today you would earn a total of  24.00  from holding ITOCHU or generate 0.5% return on investment over 90 days.

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

AGF Management Limited  vs.  ITOCHU

AGF Management

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

ITOCHU

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITOCHU are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ITOCHU is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AGF Management and ITOCHU

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

The idea behind AGF Management Limited and ITOCHU 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.