Correlation Between JAPAN AIRLINES and AEGEAN AIRLINES

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

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

Diversification Opportunities for JAPAN AIRLINES and AEGEAN AIRLINES

0.62

Correlation Coefficient

JAPAN AIRLINES  AEGEAN AIRLINES

Poor diversification

The 3 months correlation between JAPAN and AEGEAN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and AEGEAN AIRLINES

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 2.23 times less return on investment than AEGEAN AIRLINES. But when comparing it to its historical volatility, JAPAN AIRLINES is 1.31 times less risky than AEGEAN AIRLINES. It trades about 0.12 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  993.00  in AEGEAN AIRLINES on December 29, 2024 and sell it today you would earn a total of  228.00  from holding AEGEAN AIRLINES or generate 22.96% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  AEGEAN AIRLINES

JAPAN AIRLINES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, JAPAN AIRLINES may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AEGEAN AIRLINES

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, AEGEAN AIRLINES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and AEGEAN AIRLINES

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

The idea behind JAPAN AIRLINES and AEGEAN AIRLINES 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.