Correlation Between JAPAN AIRLINES and Mitsui Chemicals
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and Mitsui Chemicals 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 Mitsui Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and Mitsui Chemicals, you can compare the effects of market volatilities on JAPAN AIRLINES and Mitsui Chemicals 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 Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and Mitsui Chemicals.
Diversification Opportunities for JAPAN AIRLINES and Mitsui Chemicals
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between JAPAN and Mitsui is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals 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 Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Mitsui Chemicals go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and Mitsui Chemicals
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.8 times more return on investment than Mitsui Chemicals. However, JAPAN AIRLINES is 1.24 times less risky than Mitsui Chemicals. It trades about -0.03 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.08 per unit of risk. If you would invest 1,520 in JAPAN AIRLINES on October 28, 2024 and sell it today you would lose (10.00) from holding JAPAN AIRLINES or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN AIRLINES vs. Mitsui Chemicals
Performance |
| Timeline |
| JAPAN AIRLINES |
| Mitsui Chemicals |
JAPAN AIRLINES and Mitsui Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and Mitsui Chemicals
The main advantage of trading using opposite JAPAN AIRLINES and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, Mitsui Chemicals 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 Mitsui Chemicals will offset losses from the drop in Mitsui Chemicals' long position.| JAPAN AIRLINES vs. Grupo Carso SAB | JAPAN AIRLINES vs. GEELY AUTOMOBILE | JAPAN AIRLINES vs. Apollo Investment Corp | JAPAN AIRLINES vs. Geely Automobile Holdings |
| Mitsui Chemicals vs. Apple Inc | Mitsui Chemicals vs. Apple Inc | Mitsui Chemicals vs. Apple Inc | Mitsui Chemicals vs. Apple Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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