Correlation Between JAPAN AIRLINES and MAANSHAN IRON

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

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

Diversification Opportunities for JAPAN AIRLINES and MAANSHAN IRON

0.37

Correlation Coefficient

JAPAN AIRLINES  MAANSHAN IRON

Weak diversification

The 3 months correlation between JAPAN and MAANSHAN is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and MAANSHAN IRON H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAANSHAN IRON H 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 MAANSHAN IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAANSHAN IRON H has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and MAANSHAN IRON go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and MAANSHAN IRON

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 4.54 times less return on investment than MAANSHAN IRON. But when comparing it to its historical volatility, JAPAN AIRLINES is 3.16 times less risky than MAANSHAN IRON. It trades about 0.1 of its potential returns per unit of risk. MAANSHAN IRON H is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  16.00  in MAANSHAN IRON H on December 23, 2024 and sell it today you would earn a total of  6.00  from holding MAANSHAN IRON H or generate 37.5% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  MAANSHAN IRON H

JAPAN AIRLINES

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 8 (%) 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 April 2025.

MAANSHAN IRON H

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MAANSHAN IRON H are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MAANSHAN IRON unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and MAANSHAN IRON

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

The idea behind JAPAN AIRLINES and MAANSHAN IRON H 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.