Correlation Between Teijin and ITOCHU

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

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

Diversification Opportunities for Teijin and ITOCHU

0.35

Correlation Coefficient

Teijin  ITOCHU

Weak diversification

The 3 months correlation between Teijin and ITOCHU is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Teijin and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU 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 ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of Teijin i.e., Teijin and ITOCHU go up and down completely randomly.

Pair Corralation between Teijin and ITOCHU

Assuming the 90 days horizon Teijin is expected to generate 0.21 times more return on investment than ITOCHU. However, Teijin is 4.74 times less risky than ITOCHU. It trades about 0.2 of its potential returns per unit of risk. ITOCHU is currently generating about 0.0 per unit of risk. If you would invest  823.00  in Teijin on November 27, 2024 and sell it today you would earn a total of  27.00  from holding Teijin or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Teijin  vs.  ITOCHU

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.

ITOCHU

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITOCHU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Teijin and ITOCHU

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

The idea behind Teijin and ITOCHU 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 Global Correlations module to find global opportunities by holding instruments from different markets.