Correlation Between JAPAN AIRLINES and Strategic Investments

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

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

Diversification Opportunities for JAPAN AIRLINES and Strategic Investments

-0.26

Correlation Coefficient

JAPAN AIRLINES  Strategic Investments

Very good diversification

The 3 months correlation between JAPAN and Strategic is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Strategic Investments go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Strategic Investments

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 1.27 times less return on investment than Strategic Investments. But when comparing it to its historical volatility, JAPAN AIRLINES is 6.85 times less risky than Strategic Investments. It trades about 0.13 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Strategic Investments AS on November 28, 2024 and sell it today you would lose (1.00) from holding Strategic Investments AS or give up 7.14% of portfolio value over 90 days.

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

JAPAN AIRLINES  vs.  Strategic Investments AS

JAPAN AIRLINES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, JAPAN AIRLINES may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Strategic Investments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Strategic Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and Strategic Investments

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

The idea behind JAPAN AIRLINES and Strategic Investments AS 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.