Correlation Between Central Japan and Canadian National
Can any of the company-specific risk be diversified away by investing in both Central Japan and Canadian National 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 Central Japan and Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Japan Railway and Canadian National Railway, you can compare the effects of market volatilities on Central Japan and Canadian National 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 Central Japan with a short position of Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Japan and Canadian National.
Diversification Opportunities for Central Japan and Canadian National
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Canadian is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Central Japan Railway and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway and Central Japan 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 Central Japan Railway are associated (or correlated) with Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of Central Japan i.e., Central Japan and Canadian National go up and down completely randomly.
Pair Corralation between Central Japan and Canadian National
Assuming the 90 days horizon Central Japan Railway is expected to under-perform the Canadian National. In addition to that, Central Japan is 1.49 times more volatile than Canadian National Railway. It trades about -0.24 of its total potential returns per unit of risk. Canadian National Railway is currently generating about -0.04 per unit of volatility. If you would invest 9,792 in Canadian National Railway on October 15, 2024 and sell it today you would lose (64.00) from holding Canadian National Railway or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Japan Railway vs. Canadian National Railway
Performance |
| Timeline |
| Central Japan Railway |
| Canadian National Railway |
Central Japan and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Japan and Canadian National
The main advantage of trading using opposite Central Japan and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Japan position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| Central Japan vs. DALATA HOTEL | Central Japan vs. CARSALESCOM | Central Japan vs. COVIVIO HOTELS INH | Central Japan vs. Playa Hotels Resorts |
| Canadian National vs. PennantPark Investment | Canadian National vs. SMA Solar Technology | Canadian National vs. SEI INVESTMENTS | Canadian National vs. UPDATE SOFTWARE |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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