Correlation Between JAPAN AIRLINES and ABB
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and ABB 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 JAPAN AIRLINES and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and ABB, you can compare the effects of market volatilities on JAPAN AIRLINES and ABB 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 JAPAN AIRLINES with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and ABB.
Diversification Opportunities for JAPAN AIRLINES and ABB
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JAPAN and ABB is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and JAPAN AIRLINES 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 JAPAN AIRLINES are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and ABB go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and ABB
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the ABB. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 1.38 times less risky than ABB. The stock trades about -0.02 of its potential returns per unit of risk. The ABB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,785 in ABB on September 3, 2024 and sell it today you would earn a total of 2,465 from holding ABB or generate 88.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN AIRLINES vs. ABB
Performance |
| Timeline |
| JAPAN AIRLINES |
| ABB |
JAPAN AIRLINES and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and ABB
The main advantage of trading using opposite JAPAN AIRLINES and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| JAPAN AIRLINES vs. Park Hotels Resorts | JAPAN AIRLINES vs. Wyndham Hotels Resorts | JAPAN AIRLINES vs. ORMAT TECHNOLOGIES | JAPAN AIRLINES vs. RCM TECHNOLOGIES |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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