Correlation Between Marubeni and Iwatani

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

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

Diversification Opportunities for Marubeni and Iwatani

0.51

Correlation Coefficient

Marubeni  Iwatani

Very weak diversification

The 3 months correlation between Marubeni and Iwatani is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni and Iwatani in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iwatani and Marubeni 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 Marubeni are associated (or correlated) with Iwatani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iwatani has no effect on the direction of Marubeni i.e., Marubeni and Iwatani go up and down completely randomly.

Pair Corralation between Marubeni and Iwatani

Assuming the 90 days trading horizon Marubeni is expected to generate 1.21 times more return on investment than Iwatani. However, Marubeni is 1.21 times more volatile than Iwatani. It trades about 0.01 of its potential returns per unit of risk. Iwatani is currently generating about -0.14 per unit of risk. If you would invest  1,420  in Marubeni on September 17, 2024 and sell it today you would earn a total of  9.00  from holding Marubeni or generate 0.63% return on investment over 90 days.

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

Marubeni  vs.  Iwatani

Marubeni

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Marubeni is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Iwatani

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iwatani has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Marubeni and Iwatani

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

The idea behind Marubeni and Iwatani 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.