Correlation Between Teijin and Arca Continental

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

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

Diversification Opportunities for Teijin and Arca Continental

0.33

Correlation Coefficient

Teijin  Arca Continental

Weak diversification

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

Pair Corralation between Teijin and Arca Continental

Assuming the 90 days horizon Teijin is expected to under-perform the Arca Continental. But the pink sheet apears to be less risky and, when comparing its historical volatility, Teijin is 2.61 times less risky than Arca Continental. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Arca Continental SAB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  825.00  in Arca Continental SAB on December 28, 2024 and sell it today you would earn a total of  230.00  from holding Arca Continental SAB or generate 27.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Teijin  vs.  Arca Continental SAB

Teijin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Teijin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Teijin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arca Continental SAB

Risk-Adjusted Performance

Good

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

Pair Trading with Teijin and Arca Continental

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

The idea behind Teijin and Arca Continental SAB 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.