Correlation Between Japan Post and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Japan Post and Summit Materials 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 Summit Materials 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 Summit Materials, you can compare the effects of market volatilities on Japan Post and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Summit Materials.
Diversification Opportunities for Japan Post and Summit Materials
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Japan and Summit is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Japan Post i.e., Japan Post and Summit Materials go up and down completely randomly.
Pair Corralation between Japan Post and Summit Materials
Assuming the 90 days trading horizon Japan Post is expected to generate 4.6 times less return on investment than Summit Materials. But when comparing it to its historical volatility, Japan Post Insurance is 1.19 times less risky than Summit Materials. It trades about 0.02 of its potential returns per unit of risk. Summit Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,660 in Summit Materials on September 20, 2024 and sell it today you would earn a total of 2,160 from holding Summit Materials or generate 81.2% 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. Summit Materials
Performance |
| Timeline |
| Japan Post Insurance |
| Summit Materials |
Japan Post and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Post and Summit Materials
The main advantage of trading using opposite Japan Post and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.The idea behind Japan Post Insurance and Summit Materials 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.| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |