Correlation Between Japan Asia and SHOPRITE HLDG

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

By analyzing existing cross correlation between Japan Asia Investment and SHOPRITE HLDG, you can compare the effects of market volatilities on Japan Asia and SHOPRITE HLDG 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 Asia with a short position of SHOPRITE HLDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Asia and SHOPRITE HLDG.

Diversification Opportunities for Japan Asia and SHOPRITE HLDG

-0.65

Correlation Coefficient

Japan Asia  SHOPRITE HLDG

Excellent diversification

The 3 months correlation between Japan and SHOPRITE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and SHOPRITE HLDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHOPRITE HLDG and Japan Asia 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 Asia Investment are associated (or correlated) with SHOPRITE HLDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHOPRITE HLDG has no effect on the direction of Japan Asia i.e., Japan Asia and SHOPRITE HLDG go up and down completely randomly.

Pair Corralation between Japan Asia and SHOPRITE HLDG

Assuming the 90 days horizon Japan Asia Investment is expected to generate 1.7 times more return on investment than SHOPRITE HLDG. However, Japan Asia is 1.7 times more volatile than SHOPRITE HLDG. It trades about 0.18 of its potential returns per unit of risk. SHOPRITE HLDG is currently generating about -0.13 per unit of risk. If you would invest  122.00  in Japan Asia Investment on December 21, 2024 and sell it today you would earn a total of  38.00  from holding Japan Asia Investment or generate 31.15% return on investment over 90 days.

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

Japan Asia Investment  vs.  SHOPRITE HLDG

Japan Asia Investment

Risk-Adjusted Performance

Good

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

SHOPRITE HLDG

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHOPRITE HLDG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Japan Asia and SHOPRITE HLDG

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

The idea behind Japan Asia Investment and SHOPRITE HLDG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.