Correlation Between JAPAN AIRLINES and Food Life

Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and Food Life 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 AIRLINES and Food Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for JAPAN AIRLINES and Food Life

0.91

Correlation Coefficient

JAPAN AIRLINES  Food Life

Almost no diversification

The 3 months correlation between JAPAN and Food is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies and JAPAN AIRLINES 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 AIRLINES are associated (or correlated) with Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Food Life go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Food Life

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.51 times more return on investment than Food Life. However, JAPAN AIRLINES is 1.97 times less risky than Food Life. It trades about -0.21 of its potential returns per unit of risk. Food Life Companies is currently generating about -0.38 per unit of risk. If you would invest  1,520  in JAPAN AIRLINES on October 22, 2024 and sell it today you would lose (50.00) from holding JAPAN AIRLINES or give up 3.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

JAPAN AIRLINES  vs.  Food Life Companies

JAPAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Food Life Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Food Life Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Food Life is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JAPAN AIRLINES and Food Life

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

The idea behind JAPAN AIRLINES and Food Life 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.