Correlation Between G6 Materials and Asahi Kaisei

Can any of the company-specific risk be diversified away by investing in both G6 Materials and Asahi Kaisei 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 G6 Materials and Asahi Kaisei into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G6 Materials Corp and Asahi Kaisei Corp, you can compare the effects of market volatilities on G6 Materials and Asahi Kaisei 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 G6 Materials with a short position of Asahi Kaisei. Check out your portfolio center. Please also check ongoing floating volatility patterns of G6 Materials and Asahi Kaisei.

Diversification Opportunities for G6 Materials and Asahi Kaisei

0.07

Correlation Coefficient

G6 Materials  Asahi Kaisei

Significant diversification

The 3 months correlation between GPHBF and Asahi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding G6 Materials Corp and Asahi Kaisei Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Kaisei Corp and G6 Materials 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 G6 Materials Corp are associated (or correlated) with Asahi Kaisei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Kaisei Corp has no effect on the direction of G6 Materials i.e., G6 Materials and Asahi Kaisei go up and down completely randomly.

Pair Corralation between G6 Materials and Asahi Kaisei

Assuming the 90 days horizon G6 Materials Corp is expected to under-perform the Asahi Kaisei. In addition to that, G6 Materials is 6.89 times more volatile than Asahi Kaisei Corp. It trades about -0.04 of its total potential returns per unit of risk. Asahi Kaisei Corp is currently generating about 0.01 per unit of volatility. If you would invest  1,416  in Asahi Kaisei Corp on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Asahi Kaisei Corp or generate 0.35% return on investment over 90 days.

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

G6 Materials Corp  vs.  Asahi Kaisei Corp

G6 Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G6 Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with G6 Materials and Asahi Kaisei

The main advantage of trading using opposite G6 Materials and Asahi Kaisei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G6 Materials position performs unexpectedly, Asahi Kaisei 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 Asahi Kaisei will offset losses from the drop in Asahi Kaisei's long position.

The idea behind G6 Materials Corp and Asahi Kaisei Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.