Correlation Between MOUNT GIBSON and Suntory Beverage

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

By analyzing existing cross correlation between MOUNT GIBSON IRON and Suntory Beverage Food, you can compare the effects of market volatilities on MOUNT GIBSON and Suntory Beverage 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 MOUNT GIBSON with a short position of Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MOUNT GIBSON and Suntory Beverage.

Diversification Opportunities for MOUNT GIBSON and Suntory Beverage

0.45

Correlation Coefficient

MOUNT GIBSON  Suntory Beverage

Very weak diversification

The 3 months correlation between MOUNT and Suntory is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MOUNT GIBSON IRON and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food and MOUNT GIBSON 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 MOUNT GIBSON IRON are associated (or correlated) with Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of MOUNT GIBSON i.e., MOUNT GIBSON and Suntory Beverage go up and down completely randomly.

Pair Corralation between MOUNT GIBSON and Suntory Beverage

Assuming the 90 days trading horizon MOUNT GIBSON IRON is expected to generate 1.82 times more return on investment than Suntory Beverage. However, MOUNT GIBSON is 1.82 times more volatile than Suntory Beverage Food. It trades about 0.01 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.05 per unit of risk. If you would invest  19.00  in MOUNT GIBSON IRON on October 25, 2024 and sell it today you would earn a total of  0.00  from holding MOUNT GIBSON IRON or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

MOUNT GIBSON IRON  vs.  Suntory Beverage Food

MOUNT GIBSON IRON

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOUNT GIBSON IRON are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MOUNT GIBSON is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Suntory Beverage Food

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MOUNT GIBSON and Suntory Beverage

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

The idea behind MOUNT GIBSON IRON and Suntory Beverage Food 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.