Correlation Between East Japan and Greenbrier Companies

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

By analyzing existing cross correlation between East Japan Railway and Greenbrier Companies, you can compare the effects of market volatilities on East Japan and Greenbrier Companies 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 East Japan with a short position of Greenbrier Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and Greenbrier Companies.

Diversification Opportunities for East Japan and Greenbrier Companies

-0.87

Correlation Coefficient

East Japan  Greenbrier Companies

Pay attention - limited upside

The 3 months correlation between East and Greenbrier is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and Greenbrier Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenbrier Companies and East Japan 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 East Japan Railway are associated (or correlated) with Greenbrier Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenbrier Companies has no effect on the direction of East Japan i.e., East Japan and Greenbrier Companies go up and down completely randomly.

Pair Corralation between East Japan and Greenbrier Companies

Assuming the 90 days horizon East Japan Railway is expected to generate 0.67 times more return on investment than Greenbrier Companies. However, East Japan Railway is 1.49 times less risky than Greenbrier Companies. It trades about 0.14 of its potential returns per unit of risk. Greenbrier Companies is currently generating about -0.13 per unit of risk. If you would invest  883.00  in East Japan Railway on December 29, 2024 and sell it today you would earn a total of  96.00  from holding East Japan Railway or generate 10.87% return on investment over 90 days.

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

East Japan Railway  vs.  Greenbrier Companies

East Japan Railway

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in East Japan Railway are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, East Japan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Greenbrier Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Greenbrier Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with East Japan and Greenbrier Companies

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

The idea behind East Japan Railway and Greenbrier Companies 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 CEOs Directory module to screen CEOs from public companies around the world.