Correlation Between Japan Post and Seiko Epson
Can any of the company-specific risk be diversified away by investing in both Japan Post and Seiko Epson 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 Seiko Epson 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 Seiko Epson, you can compare the effects of market volatilities on Japan Post and Seiko Epson 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 Seiko Epson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Seiko Epson.
Diversification Opportunities for Japan Post and Seiko Epson
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Seiko is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Seiko Epson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson has no effect on the direction of Japan Post i.e., Japan Post and Seiko Epson go up and down completely randomly.
Pair Corralation between Japan Post and Seiko Epson
Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.97 times more return on investment than Seiko Epson. However, Japan Post Insurance is 1.04 times less risky than Seiko Epson. It trades about 0.04 of its potential returns per unit of risk. Seiko Epson is currently generating about 0.02 per unit of risk. If you would invest 1,490 in Japan Post Insurance on September 2, 2024 and sell it today you would earn a total of 470.00 from holding Japan Post Insurance or generate 31.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Post Insurance vs. Seiko Epson
Performance |
| Timeline |
| Japan Post Insurance |
| Seiko Epson |
Japan Post and Seiko Epson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Post and Seiko Epson
The main advantage of trading using opposite Japan Post and Seiko Epson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post position performs unexpectedly, Seiko Epson 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 Seiko Epson will offset losses from the drop in Seiko Epson's long position.The idea behind Japan Post Insurance and Seiko Epson 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.| Seiko Epson vs. Axcelis Technologies | Seiko Epson vs. THORNEY TECHS LTD | Seiko Epson vs. Digilife Technologies Limited | Seiko Epson vs. Check Point Software |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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