Correlation Between East Japan and Transport International
Can any of the company-specific risk be diversified away by investing in both East Japan and Transport International 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 Transport International 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 Transport International Holdings, you can compare the effects of market volatilities on East Japan and Transport International 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 Transport International. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and Transport International.
Diversification Opportunities for East Japan and Transport International
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between East and Transport is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and Transport International Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport International 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 Transport International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport International has no effect on the direction of East Japan i.e., East Japan and Transport International go up and down completely randomly.
Pair Corralation between East Japan and Transport International
Assuming the 90 days horizon East Japan Railway is expected to under-perform the Transport International. In addition to that, East Japan is 1.58 times more volatile than Transport International Holdings. It trades about -0.1 of its total potential returns per unit of risk. Transport International Holdings is currently generating about 0.15 per unit of volatility. If you would invest 94.00 in Transport International Holdings on October 24, 2024 and sell it today you would earn a total of 2.00 from holding Transport International Holdings or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Japan Railway vs. Transport International Holdin
Performance |
| Timeline |
| East Japan Railway |
| Transport International |
East Japan and Transport International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and Transport International
The main advantage of trading using opposite East Japan and Transport International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, Transport International 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 Transport International will offset losses from the drop in Transport International's long position.| East Japan vs. Nippon Light Metal | East Japan vs. CREO MEDICAL GRP | East Japan vs. CompuGroup Medical SE | East Japan vs. Japan Medical Dynamic |
| Transport International vs. Union Pacific | Transport International vs. CSX Corporation | Transport International vs. CRRC Limited | Transport International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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