Correlation Between LONDON STEXUNSPADRS12 and JAPAN EX
Can any of the company-specific risk be diversified away by investing in both LONDON STEXUNSPADRS12 and JAPAN EX 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 LONDON STEXUNSPADRS12 and JAPAN EX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LONDON STEXUNSPADRS12 and JAPAN EX UNADR, you can compare the effects of market volatilities on LONDON STEXUNSPADRS12 and JAPAN EX 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 LONDON STEXUNSPADRS12 with a short position of JAPAN EX. Check out your portfolio center. Please also check ongoing floating volatility patterns of LONDON STEXUNSPADRS12 and JAPAN EX.
Diversification Opportunities for LONDON STEXUNSPADRS12 and JAPAN EX
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between LONDON and JAPAN is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding LONDON STEXUNSPADRS12 and JAPAN EX UNADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN EX UNADR and LONDON STEXUNSPADRS12 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 LONDON STEXUNSPADRS12 are associated (or correlated) with JAPAN EX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN EX UNADR has no effect on the direction of LONDON STEXUNSPADRS12 i.e., LONDON STEXUNSPADRS12 and JAPAN EX go up and down completely randomly.
Pair Corralation between LONDON STEXUNSPADRS12 and JAPAN EX
Assuming the 90 days trading horizon LONDON STEXUNSPADRS12 is expected to generate 1.03 times less return on investment than JAPAN EX. But when comparing it to its historical volatility, LONDON STEXUNSPADRS12 is 1.16 times less risky than JAPAN EX. It trades about 0.07 of its potential returns per unit of risk. JAPAN EX UNADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 619.00 in JAPAN EX UNADR on November 2, 2024 and sell it today you would earn a total of 401.00 from holding JAPAN EX UNADR or generate 64.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
LONDON STEXUNSPADRS12 vs. JAPAN EX UNADR
Performance |
| Timeline |
| LONDON STEXUNSPADRS12 |
| JAPAN EX UNADR |
LONDON STEXUNSPADRS12 and JAPAN EX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LONDON STEXUNSPADRS12 and JAPAN EX
The main advantage of trading using opposite LONDON STEXUNSPADRS12 and JAPAN EX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LONDON STEXUNSPADRS12 position performs unexpectedly, JAPAN EX 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 JAPAN EX will offset losses from the drop in JAPAN EX's long position.| LONDON STEXUNSPADRS12 vs. CVR Medical Corp | LONDON STEXUNSPADRS12 vs. Apollo Medical Holdings | LONDON STEXUNSPADRS12 vs. RYU Apparel | LONDON STEXUNSPADRS12 vs. BROADSTNET LEADL 00025 |
| JAPAN EX vs. Inspire Medical Systems | JAPAN EX vs. Yanzhou Coal Mining | JAPAN EX vs. Advanced Medical Solutions | JAPAN EX vs. Avanos Medical |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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