Correlation Between SEALED AIR and East Japan
Can any of the company-specific risk be diversified away by investing in both SEALED AIR and East 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 SEALED AIR and East Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEALED AIR and East Japan Railway, you can compare the effects of market volatilities on SEALED AIR and East 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 SEALED AIR with a short position of East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and East Japan.
Diversification Opportunities for SEALED AIR and East Japan
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between SEALED and East is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway and SEALED AIR 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 SEALED AIR are associated (or correlated) with East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of SEALED AIR i.e., SEALED AIR and East Japan go up and down completely randomly.
Pair Corralation between SEALED AIR and East Japan
Assuming the 90 days trading horizon SEALED AIR is expected to under-perform the East Japan. In addition to that, SEALED AIR is 1.16 times more volatile than East Japan Railway. It trades about -0.02 of its total potential returns per unit of risk. East Japan Railway is currently generating about 0.01 per unit of volatility. If you would invest 1,595 in East Japan Railway on October 16, 2024 and sell it today you would earn a total of 58.00 from holding East Japan Railway or generate 3.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEALED AIR vs. East Japan Railway
Performance |
| Timeline |
| SEALED AIR |
| East Japan Railway |
SEALED AIR and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEALED AIR and East Japan
The main advantage of trading using opposite SEALED AIR and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR position performs unexpectedly, East 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 East Japan will offset losses from the drop in East Japan's long position.| SEALED AIR vs. Highlight Communications AG | SEALED AIR vs. Entravision Communications | SEALED AIR vs. Ribbon Communications | SEALED AIR vs. ecotel communication ag |
| East Japan vs. Renesas Electronics | East Japan vs. NorAm Drilling AS | East Japan vs. Electronic Arts | East Japan vs. Nanjing Panda Electronics |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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