Correlation Between East Japan and S-E BANKEN
Can any of the company-specific risk be diversified away by investing in both East Japan and S-E BANKEN 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 S-E BANKEN 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 S E BANKEN A , you can compare the effects of market volatilities on East Japan and S-E BANKEN 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 S-E BANKEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and S-E BANKEN.
Diversification Opportunities for East Japan and S-E BANKEN
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between East and S-E is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and S E BANKEN A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on S E BANKEN 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 S-E BANKEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of S E BANKEN has no effect on the direction of East Japan i.e., East Japan and S-E BANKEN go up and down completely randomly.
Pair Corralation between East Japan and S-E BANKEN
Assuming the 90 days horizon East Japan Railway is expected to generate 0.65 times more return on investment than S-E BANKEN. However, East Japan Railway is 1.54 times less risky than S-E BANKEN. It trades about 0.13 of its potential returns per unit of risk. S E BANKEN A is currently generating about 0.06 per unit of risk. If you would invest 1,656 in East Japan Railway on November 8, 2024 and sell it today you would earn a total of 49.00 from holding East Japan Railway or generate 2.96% 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. S E BANKEN A
Performance |
| Timeline |
| East Japan Railway |
| S E BANKEN |
East Japan and S-E BANKEN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and S-E BANKEN
The main advantage of trading using opposite East Japan and S-E BANKEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, S-E BANKEN 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 S-E BANKEN will offset losses from the drop in S-E BANKEN's long position.| East Japan vs. UPDATE SOFTWARE | East Japan vs. USU Software AG | East Japan vs. GBS Software AG | East Japan vs. Transport International Holdings |
| S-E BANKEN vs. Planet Fitness | S-E BANKEN vs. US Physical Therapy | S-E BANKEN vs. BC TECHNOLOGY GROUP | S-E BANKEN vs. Take Two Interactive Software |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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