Correlation Between Asahi Kasei and AdvanSix

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

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

Diversification Opportunities for Asahi Kasei and AdvanSix

0.4

Correlation Coefficient

Asahi Kasei  AdvanSix

Very weak diversification

The 3 months correlation between Asahi and AdvanSix is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Asahi Kasei and AdvanSix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanSix and Asahi Kasei 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 Kasei are associated (or correlated) with AdvanSix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanSix has no effect on the direction of Asahi Kasei i.e., Asahi Kasei and AdvanSix go up and down completely randomly.

Pair Corralation between Asahi Kasei and AdvanSix

Assuming the 90 days horizon Asahi Kasei is expected to generate 1.07 times more return on investment than AdvanSix. However, Asahi Kasei is 1.07 times more volatile than AdvanSix. It trades about 0.19 of its potential returns per unit of risk. AdvanSix is currently generating about 0.16 per unit of risk. If you would invest  689.00  in Asahi Kasei on September 4, 2024 and sell it today you would earn a total of  71.00  from holding Asahi Kasei or generate 10.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	41.27%
Values	Daily Returns

Asahi Kasei  vs.  AdvanSix

Asahi Kasei

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Asahi Kasei has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Asahi Kasei reported solid returns over the last few months and may actually be approaching a breakup point.

AdvanSix

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvanSix are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, AdvanSix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asahi Kasei and AdvanSix

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

The idea behind Asahi Kasei and AdvanSix 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.