Correlation Between Japan Asia and Sekisui Chemical

Can any of the company-specific risk be diversified away by investing in both Japan Asia and Sekisui Chemical 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 Sekisui Chemical 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 Sekisui Chemical Co, you can compare the effects of market volatilities on Japan Asia and Sekisui Chemical 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 Sekisui Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Asia and Sekisui Chemical.

Diversification Opportunities for Japan Asia and Sekisui Chemical

0.44

Correlation Coefficient

Japan Asia  Sekisui Chemical

Very weak diversification

The 3 months correlation between Japan and Sekisui is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of Japan Asia i.e., Japan Asia and Sekisui Chemical go up and down completely randomly.

Pair Corralation between Japan Asia and Sekisui Chemical

Assuming the 90 days horizon Japan Asia Investment is expected to generate 1.89 times more return on investment than Sekisui Chemical. However, Japan Asia is 1.89 times more volatile than Sekisui Chemical Co. It trades about 0.2 of its potential returns per unit of risk. Sekisui Chemical Co is currently generating about -0.01 per unit of risk. If you would invest  128.00  in Japan Asia Investment on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Japan Asia Investment or generate 39.06% return on investment over 90 days.

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

Japan Asia Investment  vs.  Sekisui Chemical Co

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 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

Sekisui Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sekisui Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sekisui Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Japan Asia and Sekisui Chemical

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

The idea behind Japan Asia Investment and Sekisui Chemical Co 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.