Correlation Between ITOCHU and Teijin

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

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

Diversification Opportunities for ITOCHU and Teijin

0.45

Correlation Coefficient

ITOCHU  Teijin

Very weak diversification

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

Pair Corralation between ITOCHU and Teijin

Assuming the 90 days horizon ITOCHU is expected to generate 1.38 times more return on investment than Teijin. However, ITOCHU is 1.38 times more volatile than Teijin. It trades about 0.05 of its potential returns per unit of risk. Teijin is currently generating about 0.0 per unit of risk. If you would invest  2,928  in ITOCHU on September 3, 2024 and sell it today you would earn a total of  2,172  from holding ITOCHU or generate 74.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.71%
Values	Daily Returns

ITOCHU  vs.  Teijin

ITOCHU

Risk-Adjusted Performance

0 of 100

Very Weak

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

Teijin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teijin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ITOCHU and Teijin

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

The idea behind ITOCHU and Teijin 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.