Correlation Between Greenbrier Companies and West Japan

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

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

Diversification Opportunities for Greenbrier Companies and West Japan

-0.85

Correlation Coefficient

Greenbrier Companies  West Japan

Pay attention - limited upside

The 3 months correlation between Greenbrier and West is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Greenbrier Companies and West Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Japan Railway and Greenbrier Companies 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 Greenbrier Companies are associated (or correlated) with West Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Japan Railway has no effect on the direction of Greenbrier Companies i.e., Greenbrier Companies and West Japan go up and down completely randomly.

Pair Corralation between Greenbrier Companies and West Japan

Considering the 90-day investment horizon Greenbrier Companies is expected to under-perform the West Japan. In addition to that, Greenbrier Companies is 1.38 times more volatile than West Japan Railway. It trades about -0.13 of its total potential returns per unit of risk. West Japan Railway is currently generating about 0.16 per unit of volatility. If you would invest  1,751  in West Japan Railway on December 30, 2024 and sell it today you would earn a total of  248.00  from holding West Japan Railway or generate 14.16% return on investment over 90 days.

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

Greenbrier Companies  vs.  West Japan Railway

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.

West Japan Railway

Risk-Adjusted Performance

Good

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

Pair Trading with Greenbrier Companies and West Japan

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

The idea behind Greenbrier Companies and West Japan Railway 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.