Correlation Between JAPAN AIRLINES and Five Below

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

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

Diversification Opportunities for JAPAN AIRLINES and Five Below

0.81

Correlation Coefficient

JAPAN AIRLINES  Five Below

Very poor diversification

The 3 months correlation between JAPAN and Five is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Five Below go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Five Below

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.5 times more return on investment than Five Below. However, JAPAN AIRLINES is 2.01 times less risky than Five Below. It trades about -0.02 of its potential returns per unit of risk. Five Below is currently generating about -0.03 per unit of risk. If you would invest  1,846  in JAPAN AIRLINES on October 4, 2024 and sell it today you would lose (326.00) from holding JAPAN AIRLINES or give up 17.66% of portfolio value over 90 days.

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

JAPAN AIRLINES  vs.  Five Below

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.

Five Below

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Five Below reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and Five Below

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

The idea behind JAPAN AIRLINES and Five Below 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..