Correlation Between East Japan and Canadian National
Can any of the company-specific risk be diversified away by investing in both East Japan and Canadian National 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 Canadian National 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 Canadian National Railway, you can compare the effects of market volatilities on East Japan and Canadian National 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 Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and Canadian National.
Diversification Opportunities for East Japan and Canadian National
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between East and Canadian is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of East Japan i.e., East Japan and Canadian National go up and down completely randomly.
Pair Corralation between East Japan and Canadian National
Assuming the 90 days horizon East Japan Railway is expected to generate 1.61 times more return on investment than Canadian National. However, East Japan is 1.61 times more volatile than Canadian National Railway. It trades about -0.03 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.06 per unit of risk. If you would invest 1,767 in East Japan Railway on September 26, 2024 and sell it today you would lose (90.00) from holding East Japan Railway or give up 5.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Japan Railway vs. Canadian National Railway
Performance |
| Timeline |
| East Japan Railway |
| Canadian National Railway |
East Japan and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and Canadian National
The main advantage of trading using opposite East Japan and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| East Japan vs. MAGIC SOFTWARE ENTR | East Japan vs. MCEWEN MINING INC | East Japan vs. Perseus Mining Limited | East Japan vs. CPU SOFTWAREHOUSE |
| Canadian National vs. MTR Limited | Canadian National vs. CRRC Limited | Canadian National vs. Central Japan Railway | Canadian National vs. East Japan Railway |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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