Correlation Between Emergent Health and ITOCHU

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

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

Diversification Opportunities for Emergent Health and ITOCHU

0.47

Correlation Coefficient

Emergent Health  ITOCHU

Very weak diversification

The 3 months correlation between Emergent and ITOCHU is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Health Corp and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU and Emergent Health 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 Emergent Health Corp 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 Emergent Health i.e., Emergent Health and ITOCHU go up and down completely randomly.

Pair Corralation between Emergent Health and ITOCHU

Given the investment horizon of 90 days Emergent Health Corp is expected to under-perform the ITOCHU. In addition to that, Emergent Health is 3.12 times more volatile than ITOCHU. It trades about -0.05 of its total potential returns per unit of risk. ITOCHU is currently generating about 0.0 per unit of volatility. If you would invest  4,826  in ITOCHU on September 27, 2024 and sell it today you would lose (56.00) from holding ITOCHU or give up 1.16% of portfolio value over 90 days.

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

Emergent Health Corp  vs.  ITOCHU

Emergent Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emergent Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ITOCHU

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITOCHU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, ITOCHU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Emergent Health and ITOCHU

The main advantage of trading using opposite Emergent Health and ITOCHU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emergent Health 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 Emergent Health Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.