Correlation Between JAPAN AIRLINES and SMA Solar
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and SMA Solar 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 SMA Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and SMA Solar Technology, you can compare the effects of market volatilities on JAPAN AIRLINES and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and SMA Solar.
Diversification Opportunities for JAPAN AIRLINES and SMA Solar
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between JAPAN and SMA is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and SMA Solar go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and SMA Solar
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.34 times more return on investment than SMA Solar. However, JAPAN AIRLINES is 2.92 times less risky than SMA Solar. It trades about -0.04 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.13 per unit of risk. If you would invest 1,717 in JAPAN AIRLINES on August 25, 2024 and sell it today you would lose (237.00) from holding JAPAN AIRLINES or give up 13.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
JAPAN AIRLINES vs. SMA Solar Technology
Performance |
| Timeline |
| JAPAN AIRLINES |
| SMA Solar Technology |
JAPAN AIRLINES and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and SMA Solar
The main advantage of trading using opposite JAPAN AIRLINES and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| JAPAN AIRLINES vs. Apple Inc | JAPAN AIRLINES vs. Apple Inc | JAPAN AIRLINES vs. Apple Inc | JAPAN AIRLINES vs. Apple Inc |
| SMA Solar vs. Superior Plus Corp | SMA Solar vs. Origin Agritech | SMA Solar vs. Identiv | SMA Solar vs. INTUITIVE SURGICAL |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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