Correlation Between Japan Post and SBA Communications

Can any of the company-specific risk be diversified away by investing in both Japan Post and SBA Communications 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 SBA Communications 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 SBA Communications Corp, you can compare the effects of market volatilities on Japan Post and SBA Communications 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 SBA Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and SBA Communications.

Diversification Opportunities for Japan Post and SBA Communications

0.45

Correlation Coefficient

Japan Post  SBA Communications

Very weak diversification

The 3 months correlation between Japan and SBA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and SBA Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBA Communications Corp 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 SBA Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBA Communications Corp has no effect on the direction of Japan Post i.e., Japan Post and SBA Communications go up and down completely randomly.

Pair Corralation between Japan Post and SBA Communications

Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.78 times more return on investment than SBA Communications. However, Japan Post Insurance is 1.28 times less risky than SBA Communications. It trades about 0.11 of its potential returns per unit of risk. SBA Communications Corp is currently generating about 0.07 per unit of risk. If you would invest  1,750  in Japan Post Insurance on December 20, 2024 and sell it today you would earn a total of  150.00  from holding Japan Post Insurance or generate 8.57% return on investment over 90 days.

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

Japan Post Insurance  vs.  SBA Communications Corp

Japan Post Insurance

Risk-Adjusted Performance

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 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SBA Communications Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBA Communications Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SBA Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Japan Post and SBA Communications

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

The idea behind Japan Post Insurance and SBA Communications Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.