Correlation Between Japan Post and Dassault Systèmes

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

Diversification Opportunities for Japan Post and Dassault Systèmes

0.38

Correlation Coefficient

Japan Post  Dassault Systèmes

Weak diversification

The 3 months correlation between Japan and Dassault is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Dassault Systmes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systèmes 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 Dassault Systèmes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systèmes has no effect on the direction of Japan Post i.e., Japan Post and Dassault Systèmes go up and down completely randomly.

Pair Corralation between Japan Post and Dassault Systèmes

Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 1.2 times more return on investment than Dassault Systèmes. However, Japan Post is 1.2 times more volatile than Dassault Systmes SE. It trades about 0.09 of its potential returns per unit of risk. Dassault Systmes SE is currently generating about -0.04 per unit of risk. If you would invest  1,620  in Japan Post Insurance on October 8, 2024 and sell it today you would earn a total of  150.00  from holding Japan Post Insurance or generate 9.26% return on investment over 90 days.

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

Japan Post Insurance  vs.  Dassault Systmes SE

Japan Post Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dassault Systèmes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Japan Post and Dassault Systèmes

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

The idea behind Japan Post Insurance and Dassault Systmes SE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.