Correlation Between Postal Savings and JAPAN AIRLINES

Can any of the company-specific risk be diversified away by investing in both Postal Savings and JAPAN AIRLINES 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 Postal Savings and JAPAN AIRLINES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Postal Savings Bank and JAPAN AIRLINES, you can compare the effects of market volatilities on Postal Savings and JAPAN AIRLINES 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 Postal Savings with a short position of JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postal Savings and JAPAN AIRLINES.

Diversification Opportunities for Postal Savings and JAPAN AIRLINES

-0.07

Correlation Coefficient

Postal Savings  JAPAN AIRLINES

Good diversification

The 3 months correlation between Postal and JAPAN is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Postal Savings Bank and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES and Postal Savings 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 Postal Savings Bank are associated (or correlated) with JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of Postal Savings i.e., Postal Savings and JAPAN AIRLINES go up and down completely randomly.

Pair Corralation between Postal Savings and JAPAN AIRLINES

Assuming the 90 days horizon Postal Savings Bank is expected to generate 4.75 times more return on investment than JAPAN AIRLINES. However, Postal Savings is 4.75 times more volatile than JAPAN AIRLINES. It trades about 0.08 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about -0.04 per unit of risk. If you would invest  16.00  in Postal Savings Bank on October 4, 2024 and sell it today you would earn a total of  39.00  from holding Postal Savings Bank or generate 243.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Postal Savings Bank  vs.  JAPAN AIRLINES

Postal Savings Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Postal Savings reported solid returns over the last few months and may actually be approaching a breakup point.

JAPAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Postal Savings and JAPAN AIRLINES

The main advantage of trading using opposite Postal Savings and JAPAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Savings position performs unexpectedly, JAPAN AIRLINES 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 AIRLINES will offset losses from the drop in JAPAN AIRLINES's long position.

The idea behind Postal Savings Bank and JAPAN AIRLINES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.