Correlation Between Japan Post and Acer Incorporated

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

Diversification Opportunities for Japan Post and Acer Incorporated

-0.33

Correlation Coefficient

Japan Post  Acer Incorporated

Very good diversification

The 3 months correlation between Japan and Acer is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Acer Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer Incorporated 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 Acer Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer Incorporated has no effect on the direction of Japan Post i.e., Japan Post and Acer Incorporated go up and down completely randomly.

Pair Corralation between Japan Post and Acer Incorporated

Assuming the 90 days trading horizon Japan Post is expected to generate 2.33 times less return on investment than Acer Incorporated. But when comparing it to its historical volatility, Japan Post Insurance is 5.24 times less risky than Acer Incorporated. It trades about 0.11 of its potential returns per unit of risk. Acer Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  470.00  in Acer Incorporated on October 11, 2024 and sell it today you would lose (10.00) from holding Acer Incorporated or give up 2.13% of portfolio value over 90 days.

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

Japan Post Insurance  vs.  Acer Incorporated

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 uncertain basic indicators, Japan Post unveiled solid returns over the last few months and may actually be approaching a breakup point.

Acer Incorporated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Acer Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Acer Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Post and Acer Incorporated

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

The idea behind Japan Post Insurance and Acer Incorporated 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.