Correlation Between American States and Japan Medical

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

By analyzing existing cross correlation between American States Water and Japan Medical Dynamic, you can compare the effects of market volatilities on American States and Japan Medical 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 American States with a short position of Japan Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Japan Medical.

Diversification Opportunities for American States and Japan Medical

-0.21

Correlation Coefficient

American States  Japan Medical

Very good diversification

The 3 months correlation between American and Japan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and Japan Medical Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Medical Dynamic and American States 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 American States Water are associated (or correlated) with Japan Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Medical Dynamic has no effect on the direction of American States i.e., American States and Japan Medical go up and down completely randomly.

Pair Corralation between American States and Japan Medical

Assuming the 90 days horizon American States Water is expected to under-perform the Japan Medical. But the stock apears to be less risky and, when comparing its historical volatility, American States Water is 1.13 times less risky than Japan Medical. The stock trades about -0.03 of its potential returns per unit of risk. The Japan Medical Dynamic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Japan Medical Dynamic on October 6, 2024 and sell it today you would earn a total of  8.00  from holding Japan Medical Dynamic or generate 2.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

American States Water  vs.  Japan Medical Dynamic

American States Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American States Water has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American States is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Medical Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American States and Japan Medical

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

The idea behind American States Water and Japan Medical Dynamic 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.