Correlation Between Japan Post and United Internet

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

Diversification Opportunities for Japan Post and United Internet

0.31

Correlation Coefficient

Japan Post  United Internet

Weak diversification

The 3 months correlation between Japan and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and United Internet AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Internet AG 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 United Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Internet AG has no effect on the direction of Japan Post i.e., Japan Post and United Internet go up and down completely randomly.

Pair Corralation between Japan Post and United Internet

Assuming the 90 days trading horizon Japan Post Insurance is expected to under-perform the United Internet. But the stock apears to be less risky and, when comparing its historical volatility, Japan Post Insurance is 2.12 times less risky than United Internet. The stock trades about -0.12 of its potential returns per unit of risk. The United Internet AG is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,680  in United Internet AG on December 10, 2024 and sell it today you would earn a total of  191.00  from holding United Internet AG or generate 11.37% 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.  United Internet AG

Japan Post Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Post Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Japan Post is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

United Internet AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, United Internet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Post and United Internet

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

The idea behind Japan Post Insurance and United Internet AG 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.