Correlation Between Itochu Corp and Singapore Telecommunicatio

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

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

Diversification Opportunities for Itochu Corp and Singapore Telecommunicatio

0.5

Correlation Coefficient

Itochu Corp  Singapore Telecommunicatio

Very weak diversification

The 3 months correlation between Itochu and Singapore is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Itochu Corp ADR and Singapore Telecommunications P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Telecommunicatio and Itochu Corp 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 Corp ADR are associated (or correlated) with Singapore Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Telecommunicatio has no effect on the direction of Itochu Corp i.e., Itochu Corp and Singapore Telecommunicatio go up and down completely randomly.

Pair Corralation between Itochu Corp and Singapore Telecommunicatio

Assuming the 90 days horizon Itochu Corp is expected to generate 2.54 times less return on investment than Singapore Telecommunicatio. In addition to that, Itochu Corp is 1.34 times more volatile than Singapore Telecommunications PK. It trades about 0.04 of its total potential returns per unit of risk. Singapore Telecommunications PK is currently generating about 0.13 per unit of volatility. If you would invest  1,734  in Singapore Telecommunications PK on October 9, 2024 and sell it today you would earn a total of  526.00  from holding Singapore Telecommunications PK or generate 30.33% return on investment over 90 days.

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

Itochu Corp ADR  vs.  Singapore Telecommunications P

Itochu Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Telecommunications PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Itochu Corp and Singapore Telecommunicatio

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

The idea behind Itochu Corp ADR and Singapore Telecommunications PK 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.