Correlation Between AGC and Asahi Kaisei

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

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

Diversification Opportunities for AGC and Asahi Kaisei

0.73

Correlation Coefficient

AGC  Asahi Kaisei

Poor diversification

The 3 months correlation between AGC and Asahi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AGC Inc ADR and Asahi Kaisei Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Kaisei Corp and AGC 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 AGC Inc ADR are associated (or correlated) with Asahi Kaisei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Kaisei Corp has no effect on the direction of AGC i.e., AGC and Asahi Kaisei go up and down completely randomly.

Pair Corralation between AGC and Asahi Kaisei

Assuming the 90 days horizon AGC is expected to generate 1.43 times less return on investment than Asahi Kaisei. In addition to that, AGC is 2.33 times more volatile than Asahi Kaisei Corp. It trades about 0.04 of its total potential returns per unit of risk. Asahi Kaisei Corp is currently generating about 0.13 per unit of volatility. If you would invest  1,377  in Asahi Kaisei Corp on December 28, 2024 and sell it today you would earn a total of  153.00  from holding Asahi Kaisei Corp or generate 11.11% return on investment over 90 days.

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

AGC Inc ADR  vs.  Asahi Kaisei Corp

AGC Inc ADR

Risk-Adjusted Performance

Weak

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 weak essential indicators, AGC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Asahi Kaisei Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asahi Kaisei Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Asahi Kaisei may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AGC and Asahi Kaisei

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

The idea behind AGC Inc ADR and Asahi Kaisei Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.