Correlation Between Sanyo Chemical and VITEC SOFTWARE

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

By analyzing existing cross correlation between Sanyo Chemical Industries and VITEC SOFTWARE GROUP, you can compare the effects of market volatilities on Sanyo Chemical and VITEC SOFTWARE 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 Sanyo Chemical with a short position of VITEC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanyo Chemical and VITEC SOFTWARE.

Diversification Opportunities for Sanyo Chemical and VITEC SOFTWARE

0.75

Correlation Coefficient

Sanyo Chemical  VITEC SOFTWARE

Poor diversification

The 3 months correlation between Sanyo and VITEC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sanyo Chemical Industries and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE GROUP and Sanyo Chemical 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 Sanyo Chemical Industries are associated (or correlated) with VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of Sanyo Chemical i.e., Sanyo Chemical and VITEC SOFTWARE go up and down completely randomly.

Pair Corralation between Sanyo Chemical and VITEC SOFTWARE

Assuming the 90 days horizon Sanyo Chemical is expected to generate 8.64 times less return on investment than VITEC SOFTWARE. But when comparing it to its historical volatility, Sanyo Chemical Industries is 1.51 times less risky than VITEC SOFTWARE. It trades about 0.02 of its potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,754  in VITEC SOFTWARE GROUP on December 28, 2024 and sell it today you would earn a total of  536.00  from holding VITEC SOFTWARE GROUP or generate 11.27% return on investment over 90 days.

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

Sanyo Chemical Industries  vs.  VITEC SOFTWARE GROUP

Sanyo Chemical Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanyo Chemical Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sanyo Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VITEC SOFTWARE GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VITEC SOFTWARE GROUP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, VITEC SOFTWARE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sanyo Chemical and VITEC SOFTWARE

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

The idea behind Sanyo Chemical Industries and VITEC SOFTWARE GROUP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.