Correlation Between Japan Post and Cummins
Can any of the company-specific risk be diversified away by investing in both Japan Post and Cummins 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 Cummins 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 Cummins, you can compare the effects of market volatilities on Japan Post and Cummins 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 Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Cummins.
Diversification Opportunities for Japan Post and Cummins
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Japan and Cummins is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins 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 Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Japan Post i.e., Japan Post and Cummins go up and down completely randomly.
Pair Corralation between Japan Post and Cummins
Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 2.1 times more return on investment than Cummins. However, Japan Post is 2.1 times more volatile than Cummins. It trades about 0.23 of its potential returns per unit of risk. Cummins is currently generating about 0.1 per unit of risk. If you would invest 1,640 in Japan Post Insurance on September 15, 2024 and sell it today you would earn a total of 200.00 from holding Japan Post Insurance or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Japan Post Insurance vs. Cummins
Performance |
| Timeline |
| Japan Post Insurance |
| Cummins |
Japan Post and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Post and Cummins
The main advantage of trading using opposite Japan Post and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.The idea behind Japan Post Insurance and Cummins 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.| Cummins vs. The Hanover Insurance | Cummins vs. GALENA MINING LTD | Cummins vs. United Insurance Holdings | Cummins vs. Japan Post Insurance |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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