Correlation Between Associated British and Toyo Suisan

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

By analyzing existing cross correlation between Associated British Foods and Toyo Suisan Kaisha, you can compare the effects of market volatilities on Associated British and Toyo Suisan 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 Associated British with a short position of Toyo Suisan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Toyo Suisan.

Diversification Opportunities for Associated British and Toyo Suisan

0.65

Correlation Coefficient

Associated British  Toyo Suisan

Poor diversification

The 3 months correlation between Associated and Toyo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Toyo Suisan Kaisha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyo Suisan Kaisha and Associated British 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 Associated British Foods are associated (or correlated) with Toyo Suisan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyo Suisan Kaisha has no effect on the direction of Associated British i.e., Associated British and Toyo Suisan go up and down completely randomly.

Pair Corralation between Associated British and Toyo Suisan

Assuming the 90 days horizon Associated British is expected to generate 1.31 times less return on investment than Toyo Suisan. In addition to that, Associated British is 1.16 times more volatile than Toyo Suisan Kaisha. It trades about 0.18 of its total potential returns per unit of risk. Toyo Suisan Kaisha is currently generating about 0.27 per unit of volatility. If you would invest  5,950  in Toyo Suisan Kaisha on February 7, 2024 and sell it today you would earn a total of  769.00  from holding Toyo Suisan Kaisha or generate 12.92% return on investment over 90 days.

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

Associated British Foods  vs.  Toyo Suisan Kaisha

Associated British Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Associated British showed solid returns over the last few months and may actually be approaching a breakup point.

Toyo Suisan Kaisha

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toyo Suisan Kaisha are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Toyo Suisan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Associated British and Toyo Suisan

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

The idea behind Associated British Foods and Toyo Suisan Kaisha 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.