Correlation Between Japan Post and Paragon Care

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

Diversification Opportunities for Japan Post and Paragon Care

-0.05

Correlation Coefficient

Japan Post  Paragon Care

Good diversification

The 3 months correlation between Japan and Paragon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Paragon Care Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon Care Limited 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 Paragon Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon Care Limited has no effect on the direction of Japan Post i.e., Japan Post and Paragon Care go up and down completely randomly.

Pair Corralation between Japan Post and Paragon Care

Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.48 times more return on investment than Paragon Care. However, Japan Post Insurance is 2.11 times less risky than Paragon Care. It trades about 0.11 of its potential returns per unit of risk. Paragon Care Limited is currently generating about -0.14 per unit of risk. If you would invest  1,750  in Japan Post Insurance on December 22, 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 Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Japan Post Insurance  vs.  Paragon Care Limited

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 uncertain basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Paragon Care Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paragon Care Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Japan Post and Paragon Care

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

The idea behind Japan Post Insurance and Paragon Care Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.