Correlation Between ITOCHU and FIRST SHIP

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

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

Diversification Opportunities for ITOCHU and FIRST SHIP

0.15

Correlation Coefficient

ITOCHU  FIRST SHIP

Average diversification

The 3 months correlation between ITOCHU and FIRST is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and FIRST SHIP LEASE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST SHIP LEASE 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 FIRST SHIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST SHIP LEASE has no effect on the direction of ITOCHU i.e., ITOCHU and FIRST SHIP go up and down completely randomly.

Pair Corralation between ITOCHU and FIRST SHIP

Assuming the 90 days horizon ITOCHU is expected to generate 0.44 times more return on investment than FIRST SHIP. However, ITOCHU is 2.25 times less risky than FIRST SHIP. It trades about 0.01 of its potential returns per unit of risk. FIRST SHIP LEASE is currently generating about -0.09 per unit of risk. If you would invest  4,629  in ITOCHU on May 19, 2025 and sell it today you would earn a total of  10.00  from holding ITOCHU or generate 0.22% return on investment over 90 days.

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

ITOCHU  vs.  FIRST SHIP LEASE

ITOCHU

Risk-Adjusted Performance

Weakest

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.

FIRST SHIP LEASE

Risk-Adjusted Performance

Weakest

Over the last 90 days FIRST SHIP LEASE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ITOCHU and FIRST SHIP

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

The idea behind ITOCHU and FIRST SHIP LEASE 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.