Correlation Between Itochu Corp and United Overseas

Can any of the company-specific risk be diversified away by investing in both Itochu Corp and United Overseas 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 United Overseas 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 United Overseas Bank, you can compare the effects of market volatilities on Itochu Corp and United Overseas 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 United Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itochu Corp and United Overseas.

Diversification Opportunities for Itochu Corp and United Overseas

-0.19

Correlation Coefficient

Itochu Corp  United Overseas

Good diversification

The 3 months correlation between Itochu and United is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Itochu Corp ADR and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank 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 United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Itochu Corp i.e., Itochu Corp and United Overseas go up and down completely randomly.

Pair Corralation between Itochu Corp and United Overseas

Assuming the 90 days horizon Itochu Corp ADR is expected to under-perform the United Overseas. In addition to that, Itochu Corp is 1.24 times more volatile than United Overseas Bank. It trades about -0.04 of its total potential returns per unit of risk. United Overseas Bank is currently generating about 0.03 per unit of volatility. If you would invest  5,384  in United Overseas Bank on October 9, 2024 and sell it today you would earn a total of  46.00  from holding United Overseas Bank or generate 0.85% return on investment over 90 days.

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

Itochu Corp ADR  vs.  United Overseas Bank

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.

United Overseas Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Itochu Corp and United Overseas

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

The idea behind Itochu Corp ADR and United Overseas Bank 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.