Correlation Between Orkla ASA and Toyo Suisan

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

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

Diversification Opportunities for Orkla ASA and Toyo Suisan

-0.53

Correlation Coefficient

Orkla ASA  Toyo Suisan

Excellent diversification

The 3 months correlation between Orkla and Toyo is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Orkla ASA ADR and Toyo Suisan Kaisha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyo Suisan Kaisha and Orkla ASA 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 Orkla ASA ADR are associated (or correlated) with Toyo Suisan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyo Suisan Kaisha has no effect on the direction of Orkla ASA i.e., Orkla ASA and Toyo Suisan go up and down completely randomly.

Pair Corralation between Orkla ASA and Toyo Suisan

Assuming the 90 days horizon Orkla ASA ADR is expected to generate 0.3 times more return on investment than Toyo Suisan. However, Orkla ASA ADR is 3.32 times less risky than Toyo Suisan. It trades about 0.09 of its potential returns per unit of risk. Toyo Suisan Kaisha is currently generating about -0.07 per unit of risk. If you would invest  910.00  in Orkla ASA ADR on December 1, 2024 and sell it today you would earn a total of  61.00  from holding Orkla ASA ADR or generate 6.7% return on investment over 90 days.

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

Orkla ASA ADR  vs.  Toyo Suisan Kaisha

Orkla ASA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orkla ASA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Orkla ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Toyo Suisan Kaisha

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyo Suisan Kaisha has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Orkla ASA and Toyo Suisan

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

The idea behind Orkla ASA ADR and Toyo Suisan Kaisha 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.