Correlation Between Japan Post and Focus Home

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

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

Diversification Opportunities for Japan Post and Focus Home

-0.42

Correlation Coefficient

Japan Post  Focus Home

Very good diversification

The 3 months correlation between Japan and Focus is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive and Japan Post 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 Japan Post Insurance are associated (or correlated) with Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of Japan Post i.e., Japan Post and Focus Home go up and down completely randomly.

Pair Corralation between Japan Post and Focus Home

Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.59 times more return on investment than Focus Home. However, Japan Post Insurance is 1.7 times less risky than Focus Home. It trades about 0.13 of its potential returns per unit of risk. Focus Home Interactive is currently generating about 0.06 per unit of risk. If you would invest  1,620  in Japan Post Insurance on September 13, 2024 and sell it today you would earn a total of  270.00  from holding Japan Post Insurance or generate 16.67% return on investment over 90 days.

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

Japan Post Insurance  vs.  Focus Home Interactive

Japan Post Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Japan Post unveiled solid returns over the last few months and may actually be approaching a breakup point.

Focus Home Interactive

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Home Interactive are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Focus Home may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Japan Post and Focus Home

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

The idea behind Japan Post Insurance and Focus Home Interactive 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.