Correlation Between West Japan and Central Japan
Can any of the company-specific risk be diversified away by investing in both West Japan 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 West Japan and Central Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Japan Railway and Central Japan Railway, you can compare the effects of market volatilities on West Japan 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 West Japan with a short position of Central Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of West Japan and Central Japan.
Diversification Opportunities for West Japan and Central Japan
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between West and Central is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding West Japan Railway 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 West 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 West Japan Railway 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 West Japan i.e., West Japan and Central Japan go up and down completely randomly.
Pair Corralation between West Japan and Central Japan
If you would invest 1,737 in West Japan Railway on August 29, 2024 and sell it today you would earn a total of 110.00 from holding West Japan Railway or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
West Japan Railway vs. Central Japan Railway
Performance |
| Timeline |
| West Japan Railway |
| Central Japan Railway |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
West Japan and Central Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with West Japan and Central Japan
The main advantage of trading using opposite West Japan and Central Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if West Japan 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.| West Japan vs. Central Japan Railway | West Japan vs. LB Foster | West Japan vs. East Japan Railway | West Japan vs. Greenbrier Companies |
| Central Japan vs. West Japan Railway | Central Japan vs. Central Japan Railway | Central Japan vs. LB Foster |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |