Correlation Between ITOCHU and SAN MIGUEL

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

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

Diversification Opportunities for ITOCHU and SAN MIGUEL

-0.05

Correlation Coefficient

ITOCHU  SAN MIGUEL

Good diversification

The 3 months correlation between ITOCHU and SAN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and SAN MIGUEL BREWERY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAN MIGUEL BREWERY and ITOCHU 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 ITOCHU are associated (or correlated) with SAN MIGUEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAN MIGUEL BREWERY has no effect on the direction of ITOCHU i.e., ITOCHU and SAN MIGUEL go up and down completely randomly.

Pair Corralation between ITOCHU and SAN MIGUEL

Assuming the 90 days horizon ITOCHU is expected to generate 41.96 times less return on investment than SAN MIGUEL. But when comparing it to its historical volatility, ITOCHU is 3.29 times less risky than SAN MIGUEL. It trades about 0.01 of its potential returns per unit of risk. SAN MIGUEL BREWERY is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.85  in SAN MIGUEL BREWERY on April 20, 2025 and sell it today you would earn a total of  3.15  from holding SAN MIGUEL BREWERY or generate 40.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

ITOCHU  vs.  SAN MIGUEL BREWERY

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 nearly stable basic indicators, ITOCHU is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SAN MIGUEL BREWERY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAN MIGUEL BREWERY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, SAN MIGUEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITOCHU and SAN MIGUEL

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

The idea behind ITOCHU and SAN MIGUEL BREWERY 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..