Correlation Between Japan Post and Alfa Financial

Can any of the company-specific risk be diversified away by investing in both Japan Post and Alfa Financial 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 Alfa Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Japan Post Bank and Alfa Financial Software, you can compare the effects of market volatilities on Japan Post and Alfa Financial 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 Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Alfa Financial.

Diversification Opportunities for Japan Post and Alfa Financial

0.36

Correlation Coefficient

Japan Post  Alfa Financial

Weak diversification

The 3 months correlation between Japan and Alfa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Bank and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Bank are associated (or correlated) with Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of Japan Post i.e., Japan Post and Alfa Financial go up and down completely randomly.

Pair Corralation between Japan Post and Alfa Financial

Assuming the 90 days horizon Japan Post Bank is expected to generate 0.94 times more return on investment than Alfa Financial. However, Japan Post Bank is 1.06 times less risky than Alfa Financial. It trades about 0.06 of its potential returns per unit of risk. Alfa Financial Software is currently generating about 0.01 per unit of risk. If you would invest  865.00  in Japan Post Bank on October 9, 2024 and sell it today you would earn a total of  35.00  from holding Japan Post Bank or generate 4.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

Japan Post Bank  vs.  Alfa Financial Software

Japan Post Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alfa Financial Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Japan Post and Alfa Financial

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

The idea behind Japan Post Bank and Alfa Financial Software 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.