Correlation Between O I and Toray Industries

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

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

Diversification Opportunities for O I and Toray Industries

-0.41

Correlation Coefficient

O I  Toray Industries

Very good diversification

The 3 months correlation between O I and Toray is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding O I Glass and Toray Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries and O I 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 O I Glass are associated (or correlated) with Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries has no effect on the direction of O I i.e., O I and Toray Industries go up and down completely randomly.

Pair Corralation between O I and Toray Industries

Allowing for the 90-day total investment horizon O I Glass is expected to under-perform the Toray Industries. But the stock apears to be less risky and, when comparing its historical volatility, O I Glass is 1.01 times less risky than Toray Industries. The stock trades about -0.33 of its potential returns per unit of risk. The Toray Industries is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Toray Industries on September 16, 2024 and sell it today you would earn a total of  47.00  from holding Toray Industries or generate 8.39% return on investment over 90 days.

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

O I Glass  vs.  Toray Industries

O I Glass

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days O I Glass has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Toray Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toray Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Toray Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with O I and Toray Industries

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

The idea behind O I Glass and Toray Industries 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.