Correlation Between JAPAN AIRLINES and Cullen/Frost Bankers

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

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

Diversification Opportunities for JAPAN AIRLINES and Cullen/Frost Bankers

0.41

Correlation Coefficient

JAPAN AIRLINES  Cullen/Frost Bankers

Very weak diversification

The 3 months correlation between JAPAN and Cullen/Frost is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullen/Frost Bankers 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 Cullen/Frost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullen/Frost Bankers has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Cullen/Frost Bankers go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Cullen/Frost Bankers

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 8.16 times less return on investment than Cullen/Frost Bankers. But when comparing it to its historical volatility, JAPAN AIRLINES is 1.95 times less risky than Cullen/Frost Bankers. It trades about 0.05 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,228  in CullenFrost Bankers on October 8, 2024 and sell it today you would earn a total of  2,672  from holding CullenFrost Bankers or generate 26.12% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  CullenFrost Bankers

JAPAN AIRLINES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Cullen/Frost Bankers

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CullenFrost Bankers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cullen/Frost Bankers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and Cullen/Frost Bankers

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

The idea behind JAPAN AIRLINES and CullenFrost Bankers 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.