Correlation Between Japan Post and MGIC INVESTMENT

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

Diversification Opportunities for Japan Post and MGIC INVESTMENT

-0.03

Correlation Coefficient

Japan Post  MGIC INVESTMENT

Good diversification

The 3 months correlation between Japan and MGIC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT 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 MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of Japan Post i.e., Japan Post and MGIC INVESTMENT go up and down completely randomly.

Pair Corralation between Japan Post and MGIC INVESTMENT

Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.94 times more return on investment than MGIC INVESTMENT. However, Japan Post Insurance is 1.06 times less risky than MGIC INVESTMENT. It trades about 0.13 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.02 per unit of risk. If you would invest  1,740  in Japan Post Insurance on December 28, 2024 and sell it today you would earn a total of  190.00  from holding Japan Post Insurance or generate 10.92% return on investment over 90 days.

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

Japan Post Insurance  vs.  MGIC INVESTMENT

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 10 (%) 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.

MGIC INVESTMENT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC INVESTMENT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, MGIC INVESTMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Japan Post and MGIC INVESTMENT

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

The idea behind Japan Post Insurance and MGIC INVESTMENT 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.