Correlation Between NYSE Composite and Central Japan
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Central Japan 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 NYSE Composite and Central Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Central Japan Railway, you can compare the effects of market volatilities on NYSE Composite and Central Japan 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 NYSE Composite with a short position of Central Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Central Japan.
Diversification Opportunities for NYSE Composite and Central Japan
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Central is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway and NYSE Composite 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 NYSE Composite are associated (or correlated) with Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of NYSE Composite i.e., NYSE Composite and Central Japan go up and down completely randomly.
Pair Corralation between NYSE Composite and Central Japan
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Central Japan. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 1.17 times less risky than Central Japan. The index trades about -0.05 of its potential returns per unit of risk. The Central Japan Railway is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 893.00 in Central Japan Railway on January 15, 2025 and sell it today you would earn a total of 108.00 from holding Central Japan Railway or generate 12.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Central Japan Railway
Performance |
| Timeline |
NYSE Composite and Central Japan Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Central Japan Railway
Pair trading matchups for Central Japan
Pair Trading with NYSE Composite and Central Japan
The main advantage of trading using opposite NYSE Composite and Central Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Central Japan 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 Central Japan will offset losses from the drop in Central Japan's long position.| NYSE Composite vs. Azul SA | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Allegiant Travel | NYSE Composite vs. Ryanair Holdings PLC |
| Central Japan vs. West Japan Railway | Central Japan vs. Central Japan Railway | Central Japan vs. LB Foster | Central Japan vs. East Japan Railway |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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