Correlation Between Playmates Toys and Japan Post

Can any of the company-specific risk be diversified away by investing in both Playmates Toys and Japan Post 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 Playmates Toys and Japan Post into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Playmates Toys Limited and Japan Post Insurance, you can compare the effects of market volatilities on Playmates Toys and Japan Post 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 Playmates Toys with a short position of Japan Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playmates Toys and Japan Post.

Diversification Opportunities for Playmates Toys and Japan Post

-0.7

Correlation Coefficient

Playmates Toys  Japan Post

Excellent diversification

The 3 months correlation between Playmates and Japan is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Playmates Toys Limited and Japan Post Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Insurance and Playmates Toys 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 Playmates Toys Limited are associated (or correlated) with Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Insurance has no effect on the direction of Playmates Toys i.e., Playmates Toys and Japan Post go up and down completely randomly.

Pair Corralation between Playmates Toys and Japan Post

Assuming the 90 days horizon Playmates Toys Limited is expected to generate 1.78 times more return on investment than Japan Post. However, Playmates Toys is 1.78 times more volatile than Japan Post Insurance. It trades about 0.05 of its potential returns per unit of risk. Japan Post Insurance is currently generating about -0.26 per unit of risk. If you would invest  6.50  in Playmates Toys Limited on October 11, 2024 and sell it today you would earn a total of  0.10  from holding Playmates Toys Limited or generate 1.54% return on investment over 90 days.

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

Playmates Toys Limited  vs.  Japan Post Insurance

Playmates Toys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playmates Toys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Playmates Toys is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Post Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Japan Post unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playmates Toys and Japan Post

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

The idea behind Playmates Toys Limited and Japan Post Insurance 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.