Correlation Between JAPAN AIRLINES and Walmart
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and Walmart, you can compare the effects of market volatilities on JAPAN AIRLINES and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and Walmart.
Diversification Opportunities for JAPAN AIRLINES and Walmart
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between JAPAN and Walmart is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Walmart go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and Walmart
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.85 times more return on investment than Walmart. However, JAPAN AIRLINES is 1.18 times less risky than Walmart. It trades about 0.14 of its potential returns per unit of risk. Walmart is currently generating about 0.04 per unit of risk. If you would invest 1,470 in JAPAN AIRLINES on September 26, 2024 and sell it today you would earn a total of 50.00 from holding JAPAN AIRLINES or generate 3.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
JAPAN AIRLINES vs. Walmart
Performance |
Timeline |
JAPAN AIRLINES |
Walmart |
JAPAN AIRLINES and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with JAPAN AIRLINES and Walmart
The main advantage of trading using opposite JAPAN AIRLINES and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.JAPAN AIRLINES vs. Apple Inc | JAPAN AIRLINES vs. Apple Inc | JAPAN AIRLINES vs. Microsoft | JAPAN AIRLINES vs. Microsoft |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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