Correlation Between Tokyu Construction and Admiral Group

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

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

Diversification Opportunities for Tokyu Construction and Admiral Group

0.33

Correlation Coefficient

Tokyu Construction  Admiral Group

Weak diversification

The 3 months correlation between Tokyu and Admiral is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tokyu Construction Co and Admiral Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Admiral Group plc and Tokyu Construction 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 Tokyu Construction Co are associated (or correlated) with Admiral Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Admiral Group plc has no effect on the direction of Tokyu Construction i.e., Tokyu Construction and Admiral Group go up and down completely randomly.

Pair Corralation between Tokyu Construction and Admiral Group

Assuming the 90 days horizon Tokyu Construction Co is expected to generate 0.63 times more return on investment than Admiral Group. However, Tokyu Construction Co is 1.59 times less risky than Admiral Group. It trades about 0.13 of its potential returns per unit of risk. Admiral Group plc is currently generating about -0.02 per unit of risk. If you would invest  402.00  in Tokyu Construction Co on October 24, 2024 and sell it today you would earn a total of  28.00  from holding Tokyu Construction Co or generate 6.97% return on investment over 90 days.

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

Tokyu Construction Co  vs.  Admiral Group plc

Tokyu Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyu Construction Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokyu Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Admiral Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Admiral Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Admiral Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tokyu Construction and Admiral Group

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

The idea behind Tokyu Construction Co and Admiral Group plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.