Correlation Between GBX International and Tokyu Corp

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

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

Diversification Opportunities for GBX International and Tokyu Corp

-0.6

Correlation Coefficient

GBX International  Tokyu Corp

Excellent diversification

The 3 months correlation between GBX and Tokyu is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GBX International Group and Tokyu Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyu Corp ADR and GBX International 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 GBX International Group are associated (or correlated) with Tokyu Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyu Corp ADR has no effect on the direction of GBX International i.e., GBX International and Tokyu Corp go up and down completely randomly.

Pair Corralation between GBX International and Tokyu Corp

Given the investment horizon of 90 days GBX International Group is expected to generate 32.98 times more return on investment than Tokyu Corp. However, GBX International is 32.98 times more volatile than Tokyu Corp ADR. It trades about 0.1 of its potential returns per unit of risk. Tokyu Corp ADR is currently generating about 0.01 per unit of risk. If you would invest  0.01  in GBX International Group on September 23, 2024 and sell it today you would earn a total of  0.01  from holding GBX International Group or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

GBX International Group  vs.  Tokyu Corp ADR

GBX International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GBX International Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, GBX International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tokyu Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with GBX International and Tokyu Corp

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

The idea behind GBX International Group and Tokyu Corp ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.