Correlation Between Asahi Kaisei and E I

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

By analyzing existing cross correlation between Asahi Kaisei Corp and E I du, you can compare the effects of market volatilities on Asahi Kaisei and E I 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 Asahi Kaisei with a short position of E I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asahi Kaisei and E I.

Diversification Opportunities for Asahi Kaisei and E I

0.59

Correlation Coefficient

Asahi Kaisei  E I

Very weak diversification

The 3 months correlation between Asahi and CTA-PB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Asahi Kaisei Corp and E I du in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E I du and Asahi Kaisei 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 Asahi Kaisei Corp are associated (or correlated) with E I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E I du has no effect on the direction of Asahi Kaisei i.e., Asahi Kaisei and E I go up and down completely randomly.

Pair Corralation between Asahi Kaisei and E I

Assuming the 90 days horizon Asahi Kaisei Corp is expected to generate 2.5 times more return on investment than E I. However, Asahi Kaisei is 2.5 times more volatile than E I du. It trades about -0.05 of its potential returns per unit of risk. E I du is currently generating about -0.15 per unit of risk. If you would invest  1,461  in Asahi Kaisei Corp on February 6, 2024 and sell it today you would lose (25.00) from holding Asahi Kaisei Corp or give up 1.71% of portfolio value over 90 days.

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

Asahi Kaisei Corp  vs.  E I du

Asahi Kaisei Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

E I du

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E I du has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, E I is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asahi Kaisei and E I

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

The idea behind Asahi Kaisei Corp and E I du 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..