Correlation Between JAPAN AIRLINES and Walmart

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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 Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

JAPAN AIRLINES  vs.  Walmart

 Performance 
       Timeline  
JAPAN AIRLINES 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Walmart 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

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.
The idea behind JAPAN AIRLINES and Walmart pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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