Correlation Between AGF Management and Japan Asia

Can any of the company-specific risk be diversified away by investing in both AGF Management and Japan Asia 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 Japan Asia 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 Japan Asia Investment, you can compare the effects of market volatilities on AGF Management and Japan Asia 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 Japan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGF Management and Japan Asia.

Diversification Opportunities for AGF Management and Japan Asia

0.67

Correlation Coefficient

AGF Management  Japan Asia

Poor diversification

The 3 months correlation between AGF and Japan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AGF Management Limited and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment 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 Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of AGF Management i.e., AGF Management and Japan Asia go up and down completely randomly.

Pair Corralation between AGF Management and Japan Asia

Assuming the 90 days horizon AGF Management Limited is expected to generate 1.1 times more return on investment than Japan Asia. However, AGF Management is 1.1 times more volatile than Japan Asia Investment. It trades about 0.11 of its potential returns per unit of risk. Japan Asia Investment is currently generating about 0.03 per unit of risk. If you would invest  664.00  in AGF Management Limited on October 26, 2024 and sell it today you would earn a total of  71.00  from holding AGF Management Limited or generate 10.69% return on investment over 90 days.

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

AGF Management Limited  vs.  Japan Asia Investment

AGF Management

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, AGF Management may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Japan Asia Investment

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Asia 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 Japan Asia

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

The idea behind AGF Management Limited and Japan Asia Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.