Correlation Between JAPAN AIRLINES and KHD Humboldt
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and KHD Humboldt 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 KHD Humboldt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and KHD Humboldt Wedag, you can compare the effects of market volatilities on JAPAN AIRLINES and KHD Humboldt 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 KHD Humboldt. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and KHD Humboldt.
Diversification Opportunities for JAPAN AIRLINES and KHD Humboldt
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JAPAN and KHD is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and KHD Humboldt Wedag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KHD Humboldt Wedag 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 KHD Humboldt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KHD Humboldt Wedag has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and KHD Humboldt go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and KHD Humboldt
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 2.38 times less return on investment than KHD Humboldt. But when comparing it to its historical volatility, JAPAN AIRLINES is 1.93 times less risky than KHD Humboldt. It trades about 0.02 of its potential returns per unit of risk. KHD Humboldt Wedag is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 765.00 in KHD Humboldt Wedag on September 3, 2024 and sell it today you would earn a total of 25.00 from holding KHD Humboldt Wedag or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
JAPAN AIRLINES vs. KHD Humboldt Wedag
Performance |
| Timeline |
| JAPAN AIRLINES |
| KHD Humboldt Wedag |
JAPAN AIRLINES and KHD Humboldt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and KHD Humboldt
The main advantage of trading using opposite JAPAN AIRLINES and KHD Humboldt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, KHD Humboldt 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 KHD Humboldt will offset losses from the drop in KHD Humboldt'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 |
| KHD Humboldt vs. Uber Technologies | KHD Humboldt vs. United Insurance Holdings | KHD Humboldt vs. ZURICH INSURANCE GROUP | KHD Humboldt vs. AAC TECHNOLOGHLDGADR |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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