Correlation Between Ajinomoto and Lancaster Colony

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

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

Diversification Opportunities for Ajinomoto and Lancaster Colony

0.34

Correlation Coefficient

Ajinomoto  Lancaster Colony

Weak diversification

The 3 months correlation between Ajinomoto and Lancaster is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ajinomoto Co ADR and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony and Ajinomoto 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 Ajinomoto Co ADR are associated (or correlated) with Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of Ajinomoto i.e., Ajinomoto and Lancaster Colony go up and down completely randomly.

Pair Corralation between Ajinomoto and Lancaster Colony

Assuming the 90 days horizon Ajinomoto Co ADR is expected to under-perform the Lancaster Colony. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ajinomoto Co ADR is 1.11 times less risky than Lancaster Colony. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Lancaster Colony is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  17,644  in Lancaster Colony on December 23, 2024 and sell it today you would lose (111.00) from holding Lancaster Colony or give up 0.63% of portfolio value over 90 days.

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

Ajinomoto Co ADR  vs.  Lancaster Colony

Ajinomoto Co ADR

Risk-Adjusted Performance

Very Weak

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

Lancaster Colony

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lancaster Colony has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ajinomoto and Lancaster Colony

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

The idea behind Ajinomoto Co ADR and Lancaster Colony 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.