Correlation Between East Japan and China Communications
Can any of the company-specific risk be diversified away by investing in both East Japan and China Communications 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 China Communications 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 China Communications Services, you can compare the effects of market volatilities on East Japan and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and China Communications.
Diversification Opportunities for East Japan and China Communications
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and China is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of East Japan i.e., East Japan and China Communications go up and down completely randomly.
Pair Corralation between East Japan and China Communications
Assuming the 90 days horizon East Japan Railway is expected to under-perform the China Communications. In addition to that, East Japan is 1.34 times more volatile than China Communications Services. It trades about -0.09 of its total potential returns per unit of risk. China Communications Services is currently generating about 0.08 per unit of volatility. If you would invest 49.00 in China Communications Services on October 17, 2024 and sell it today you would earn a total of 2.00 from holding China Communications Services or generate 4.08% 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. China Communications Services
Performance |
| Timeline |
| East Japan Railway |
| China Communications |
East Japan and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and China Communications
The main advantage of trading using opposite East Japan and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| East Japan vs. China Communications Services | East Japan vs. Guidewire Software | East Japan vs. CRISPR Therapeutics AG | East Japan vs. Unity Software |
| China Communications vs. Zoom Video Communications | China Communications vs. UNIVERSAL MUSIC GROUP | China Communications vs. betterU Education Corp | China Communications vs. Rocket Internet SE |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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