Correlation Between Italian Thai and Inoue Rubber

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

By analyzing existing cross correlation between Italian Thai Development Public and Inoue Rubber Public, you can compare the effects of market volatilities on Italian Thai and Inoue Rubber 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 Italian Thai with a short position of Inoue Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Italian Thai and Inoue Rubber.

Diversification Opportunities for Italian Thai and Inoue Rubber

0.9

Correlation Coefficient

Italian Thai  Inoue Rubber

Almost no diversification

The 3 months correlation between Italian and Inoue is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Italian Thai Development Publi and Inoue Rubber Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inoue Rubber Public and Italian Thai 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 Italian Thai Development Public are associated (or correlated) with Inoue Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inoue Rubber Public has no effect on the direction of Italian Thai i.e., Italian Thai and Inoue Rubber go up and down completely randomly.

Pair Corralation between Italian Thai and Inoue Rubber

Assuming the 90 days trading horizon Italian Thai Development Public is expected to under-perform the Inoue Rubber. In addition to that, Italian Thai is 2.26 times more volatile than Inoue Rubber Public. It trades about -0.37 of its total potential returns per unit of risk. Inoue Rubber Public is currently generating about -0.2 per unit of volatility. If you would invest  1,324  in Inoue Rubber Public on December 5, 2024 and sell it today you would lose (174.00) from holding Inoue Rubber Public or give up 13.14% of portfolio value over 90 days.

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

Italian Thai Development Publi  vs.  Inoue Rubber Public

Italian Thai Develop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Italian Thai Development Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Inoue Rubber Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inoue Rubber Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Italian Thai and Inoue Rubber

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

The idea behind Italian Thai Development Public and Inoue Rubber Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.