Correlation Between Japan Airlines and Air France-KLM
Can any of the company-specific risk be diversified away by investing in both Japan Airlines and Air France-KLM 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 Air France-KLM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Airlines Ltd and Air France KLM SA, you can compare the effects of market volatilities on Japan Airlines and Air France-KLM 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 Air France-KLM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Airlines and Air France-KLM.
Diversification Opportunities for Japan Airlines and Air France-KLM
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Air is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Japan Airlines Ltd and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 Ltd are associated (or correlated) with Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Japan Airlines i.e., Japan Airlines and Air France-KLM go up and down completely randomly.
Pair Corralation between Japan Airlines and Air France-KLM
Assuming the 90 days horizon Japan Airlines is expected to generate 298.32 times less return on investment than Air France-KLM. But when comparing it to its historical volatility, Japan Airlines Ltd is 139.68 times less risky than Air France-KLM. It trades about 0.09 of its potential returns per unit of risk. Air France KLM SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 170.00 in Air France KLM SA on November 2, 2024 and sell it today you would earn a total of 636.00 from holding Air France KLM SA or generate 374.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 22.89% |
| Values | Daily Returns |
Japan Airlines Ltd vs. Air France KLM SA
Performance |
| Timeline |
| Japan Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Air France KLM |
Japan Airlines and Air France-KLM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Airlines and Air France-KLM
The main advantage of trading using opposite Japan Airlines and Air France-KLM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Airlines position performs unexpectedly, Air France-KLM 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 Air France-KLM will offset losses from the drop in Air France-KLM's long position.| Japan Airlines vs. Qantas Airways Limited | Japan Airlines vs. Cathay Pacific Airways | Japan Airlines vs. Singapore Airlines | Japan Airlines vs. Singapore Airlines |
| Air France-KLM vs. Cebu Air | Air France-KLM vs. easyJet plc | Air France-KLM vs. Norse Atlantic ASA | Air France-KLM vs. Air China Limited |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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