Correlation Between Asahi Kaisei and AGC

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

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

Diversification Opportunities for Asahi Kaisei and AGC

0.42

Correlation Coefficient

Asahi Kaisei  AGC

Very weak diversification

The 3 months correlation between Asahi and AGC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Asahi Kaisei Corp and AGC Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGC Inc ADR and Asahi Kaisei 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 Asahi Kaisei Corp are associated (or correlated) with AGC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGC Inc ADR has no effect on the direction of Asahi Kaisei i.e., Asahi Kaisei and AGC go up and down completely randomly.

Pair Corralation between Asahi Kaisei and AGC

Assuming the 90 days horizon Asahi Kaisei Corp is expected to generate 0.55 times more return on investment than AGC. However, Asahi Kaisei Corp is 1.83 times less risky than AGC. It trades about 0.05 of its potential returns per unit of risk. AGC Inc ADR is currently generating about -0.02 per unit of risk. If you would invest  1,313  in Asahi Kaisei Corp on September 1, 2024 and sell it today you would earn a total of  108.00  from holding Asahi Kaisei Corp or generate 8.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Asahi Kaisei Corp  vs.  AGC Inc ADR

Asahi Kaisei Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asahi Kaisei Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Asahi Kaisei is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AGC Inc ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGC Inc ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, AGC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asahi Kaisei and AGC

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

The idea behind Asahi Kaisei Corp and AGC Inc ADR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.