Correlation Between Japan Post and Valero Energy

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

Diversification Opportunities for Japan Post and Valero Energy

0.0

Correlation Coefficient

Japan Post  Valero Energy

Pay attention - limited upside

The 3 months correlation between Japan and Valero is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Valero Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy Corp 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy Corp has no effect on the direction of Japan Post i.e., Japan Post and Valero Energy go up and down completely randomly.

Pair Corralation between Japan Post and Valero Energy

If you would invest  1,630  in Japan Post Insurance on October 23, 2024 and sell it today you would earn a total of  150.00  from holding Japan Post Insurance or generate 9.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

Japan Post Insurance  vs.  Valero Energy Corp

Japan Post Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Japan Post unveiled solid returns over the last few months and may actually be approaching a breakup point.

Valero Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Japan Post and Valero Energy

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

The idea behind Japan Post Insurance and Valero Energy Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..