Correlation Between China Eastern and Nishi-Nippon Railroad
Can any of the company-specific risk be diversified away by investing in both China Eastern and Nishi-Nippon Railroad 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 China Eastern and Nishi-Nippon Railroad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Eastern Airlines and Nishi Nippon Railroad Co, you can compare the effects of market volatilities on China Eastern and Nishi-Nippon Railroad 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 China Eastern with a short position of Nishi-Nippon Railroad. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Eastern and Nishi-Nippon Railroad.
Diversification Opportunities for China Eastern and Nishi-Nippon Railroad
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between China and Nishi-Nippon is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines and Nishi Nippon Railroad Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishi Nippon Railroad and China Eastern 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 China Eastern Airlines are associated (or correlated) with Nishi-Nippon Railroad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishi Nippon Railroad has no effect on the direction of China Eastern i.e., China Eastern and Nishi-Nippon Railroad go up and down completely randomly.
Pair Corralation between China Eastern and Nishi-Nippon Railroad
Assuming the 90 days trading horizon China Eastern Airlines is expected to under-perform the Nishi-Nippon Railroad. In addition to that, China Eastern is 1.31 times more volatile than Nishi Nippon Railroad Co. It trades about -0.31 of its total potential returns per unit of risk. Nishi Nippon Railroad Co is currently generating about -0.04 per unit of volatility. If you would invest 1,370 in Nishi Nippon Railroad Co on October 12, 2024 and sell it today you would lose (20.00) from holding Nishi Nippon Railroad Co or give up 1.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Eastern Airlines vs. Nishi Nippon Railroad Co
Performance |
| Timeline |
| China Eastern Airlines |
| Nishi Nippon Railroad |
China Eastern and Nishi-Nippon Railroad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Eastern and Nishi-Nippon Railroad
The main advantage of trading using opposite China Eastern and Nishi-Nippon Railroad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern position performs unexpectedly, Nishi-Nippon Railroad 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 Nishi-Nippon Railroad will offset losses from the drop in Nishi-Nippon Railroad's long position.| China Eastern vs. Axway Software SA | China Eastern vs. CyberArk Software | China Eastern vs. Brockhaus Capital Management | China Eastern vs. Unity Software |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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