Correlation Between JAPAN AIRLINES and SCOTT TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and SCOTT TECHNOLOGY, you can compare the effects of market volatilities on JAPAN AIRLINES and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and SCOTT TECHNOLOGY.
Diversification Opportunities for JAPAN AIRLINES and SCOTT TECHNOLOGY
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between JAPAN and SCOTT is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and SCOTT TECHNOLOGY go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and SCOTT TECHNOLOGY
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the SCOTT TECHNOLOGY. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 2.58 times less risky than SCOTT TECHNOLOGY. The stock trades about -0.02 of its potential returns per unit of risk. The SCOTT TECHNOLOGY is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 143.00 in SCOTT TECHNOLOGY on August 31, 2024 and sell it today you would lose (7.00) from holding SCOTT TECHNOLOGY or give up 4.9% 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. SCOTT TECHNOLOGY
Performance |
| Timeline |
| JAPAN AIRLINES |
| SCOTT TECHNOLOGY |
JAPAN AIRLINES and SCOTT TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and SCOTT TECHNOLOGY
The main advantage of trading using opposite JAPAN AIRLINES and SCOTT TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY will offset losses from the drop in SCOTT TECHNOLOGY's long position.| JAPAN AIRLINES vs. SIVERS SEMICONDUCTORS AB | JAPAN AIRLINES vs. Darden Restaurants | JAPAN AIRLINES vs. Reliance Steel Aluminum | JAPAN AIRLINES vs. Q2M Managementberatung AG |
| SCOTT TECHNOLOGY vs. SIVERS SEMICONDUCTORS AB | SCOTT TECHNOLOGY vs. Darden Restaurants | SCOTT TECHNOLOGY vs. Reliance Steel Aluminum | SCOTT TECHNOLOGY vs. Q2M Managementberatung AG |
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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