Correlation Between Japan Post and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Japan Post and Universal Insurance 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 Japan Post and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Post Insurance and Universal Insurance Holdings, you can compare the effects of market volatilities on Japan Post and Universal Insurance 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 Japan Post with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Universal Insurance.
Diversification Opportunities for Japan Post and Universal Insurance
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Japan and Universal is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Japan Post 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 Japan Post Insurance are associated (or correlated) with Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Japan Post i.e., Japan Post and Universal Insurance go up and down completely randomly.
Pair Corralation between Japan Post and Universal Insurance
Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.62 times more return on investment than Universal Insurance. However, Japan Post Insurance is 1.6 times less risky than Universal Insurance. It trades about 0.23 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.07 per unit of risk. If you would invest 1,560 in Japan Post Insurance on August 28, 2024 and sell it today you would earn a total of 350.00 from holding Japan Post Insurance or generate 22.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Post Insurance vs. Universal Insurance Holdings
Performance |
| Timeline |
| Japan Post Insurance |
| Universal Insurance |
Japan Post and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Post and Universal Insurance
The main advantage of trading using opposite Japan Post and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post position performs unexpectedly, Universal Insurance 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 Universal Insurance will offset losses from the drop in Universal Insurance's long position.| Japan Post vs. CONAGRA FOODS | Japan Post vs. Dairy Farm International | Japan Post vs. Mitsui Chemicals | Japan Post vs. CHEMICAL INDUSTRIES |
| Universal Insurance vs. Algonquin Power Utilities | Universal Insurance vs. BE Semiconductor Industries | Universal Insurance vs. NORTHEAST UTILITIES | Universal Insurance vs. SERI INDUSTRIAL EO |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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