Correlation Between East Japan and Greenbrier Companies
Can any of the company-specific risk be diversified away by investing in both East Japan and Greenbrier Companies 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 East Japan and Greenbrier Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Japan Railway and Greenbrier Companies, you can compare the effects of market volatilities on East Japan and Greenbrier Companies 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 East Japan with a short position of Greenbrier Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and Greenbrier Companies.
Diversification Opportunities for East Japan and Greenbrier Companies
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between East and Greenbrier is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and Greenbrier Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenbrier Companies and East Japan 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 East Japan Railway are associated (or correlated) with Greenbrier Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenbrier Companies has no effect on the direction of East Japan i.e., East Japan and Greenbrier Companies go up and down completely randomly.
Pair Corralation between East Japan and Greenbrier Companies
Assuming the 90 days horizon East Japan Railway is expected to under-perform the Greenbrier Companies. But the pink sheet apears to be less risky and, when comparing its historical volatility, East Japan Railway is 2.02 times less risky than Greenbrier Companies. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Greenbrier Companies is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,728 in Greenbrier Companies on August 28, 2024 and sell it today you would earn a total of 2,088 from holding Greenbrier Companies or generate 44.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Japan Railway vs. Greenbrier Companies
Performance |
| Timeline |
| East Japan Railway |
| Greenbrier Companies |
East Japan and Greenbrier Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and Greenbrier Companies
The main advantage of trading using opposite East Japan and Greenbrier Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, Greenbrier Companies 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 Greenbrier Companies will offset losses from the drop in Greenbrier Companies' long position.| East Japan vs. Central Japan Railway | East Japan vs. LB Foster | East Japan vs. Canadian National Railway | East Japan vs. West Japan Railway |
| Greenbrier Companies vs. LB Foster | Greenbrier Companies vs. Freightcar America | Greenbrier Companies vs. Westinghouse Air Brake | Greenbrier Companies vs. CSX Corporation |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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