Correlation Between Marubeni and Alaska Power

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

By analyzing existing cross correlation between Marubeni and Alaska Power Telephone, you can compare the effects of market volatilities on Marubeni and Alaska Power 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 Alaska Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marubeni and Alaska Power.

Diversification Opportunities for Marubeni and Alaska Power

0.29

Correlation Coefficient

Marubeni  Alaska Power

Modest diversification

The 3 months correlation between Marubeni and Alaska is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni and Alaska Power Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Power Telephone 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 Alaska Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Power Telephone has no effect on the direction of Marubeni i.e., Marubeni and Alaska Power go up and down completely randomly.

Pair Corralation between Marubeni and Alaska Power

Assuming the 90 days horizon Marubeni is expected to generate 2.79 times more return on investment than Alaska Power. However, Marubeni is 2.79 times more volatile than Alaska Power Telephone. It trades about 0.08 of its potential returns per unit of risk. Alaska Power Telephone is currently generating about 0.06 per unit of risk. If you would invest  1,470  in Marubeni on December 29, 2024 and sell it today you would earn a total of  180.00  from holding Marubeni or generate 12.24% return on investment over 90 days.

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

Marubeni  vs.  Alaska Power Telephone

Marubeni

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Marubeni reported solid returns over the last few months and may actually be approaching a breakup point.

Alaska Power Telephone

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Power Telephone are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Alaska Power is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Marubeni and Alaska Power

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

The idea behind Marubeni and Alaska Power Telephone 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.