Correlation Between Isuzu Motors and Morgan Advanced

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

By analyzing existing cross correlation between Isuzu Motors and Morgan Advanced Materials, you can compare the effects of market volatilities on Isuzu Motors and Morgan Advanced 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 Isuzu Motors with a short position of Morgan Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Isuzu Motors and Morgan Advanced.

Diversification Opportunities for Isuzu Motors and Morgan Advanced

0.62

Correlation Coefficient

Isuzu Motors  Morgan Advanced

Poor diversification

The 3 months correlation between Isuzu and Morgan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Isuzu Motors and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials and Isuzu Motors 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 Isuzu Motors are associated (or correlated) with Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Isuzu Motors i.e., Isuzu Motors and Morgan Advanced go up and down completely randomly.

Pair Corralation between Isuzu Motors and Morgan Advanced

Assuming the 90 days horizon Isuzu Motors is expected to generate 0.72 times more return on investment than Morgan Advanced. However, Isuzu Motors is 1.39 times less risky than Morgan Advanced. It trades about 0.03 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.09 per unit of risk. If you would invest  1,328  in Isuzu Motors on December 20, 2024 and sell it today you would earn a total of  20.00  from holding Isuzu Motors or generate 1.51% return on investment over 90 days.

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

Isuzu Motors  vs.  Morgan Advanced Materials

Isuzu Motors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Isuzu Motors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Isuzu Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Morgan Advanced Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Isuzu Motors and Morgan Advanced

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

The idea behind Isuzu Motors and Morgan Advanced Materials 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.