Correlation Between American States and Tokyu Construction

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

By analyzing existing cross correlation between American States Water and Tokyu Construction Co, you can compare the effects of market volatilities on American States and Tokyu Construction 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 American States with a short position of Tokyu Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Tokyu Construction.

Diversification Opportunities for American States and Tokyu Construction

-0.15

Correlation Coefficient

American States  Tokyu Construction

Good diversification

The 3 months correlation between American and Tokyu is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and Tokyu Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Construction and American States 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 American States Water are associated (or correlated) with Tokyu Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Construction has no effect on the direction of American States i.e., American States and Tokyu Construction go up and down completely randomly.

Pair Corralation between American States and Tokyu Construction

Assuming the 90 days horizon American States Water is expected to under-perform the Tokyu Construction. In addition to that, American States is 1.03 times more volatile than Tokyu Construction Co. It trades about -0.01 of its total potential returns per unit of risk. Tokyu Construction Co is currently generating about 0.0 per unit of volatility. If you would invest  446.00  in Tokyu Construction Co on October 4, 2024 and sell it today you would lose (20.00) from holding Tokyu Construction Co or give up 4.48% of portfolio value over 90 days.

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

American States Water  vs.  Tokyu Construction Co

American States Water

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tokyu Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American States and Tokyu Construction

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

The idea behind American States Water and Tokyu Construction Co 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 Global Correlations module to find global opportunities by holding instruments from different markets.