Correlation Between Japan Asia and TRAVEL +

Can any of the company-specific risk be diversified away by investing in both Japan Asia and TRAVEL + 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 TRAVEL + 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 TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Japan Asia and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Asia and TRAVEL +.

Diversification Opportunities for Japan Asia and TRAVEL +

0.34

Correlation Coefficient

Japan Asia  TRAVEL +

Weak diversification

The 3 months correlation between Japan and TRAVEL is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Japan Asia i.e., Japan Asia and TRAVEL + go up and down completely randomly.

Pair Corralation between Japan Asia and TRAVEL +

Assuming the 90 days horizon Japan Asia is expected to generate 8.82 times less return on investment than TRAVEL +. In addition to that, Japan Asia is 1.96 times more volatile than TRAVEL LEISURE DL 01. It trades about 0.0 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.08 per unit of volatility. If you would invest  3,372  in TRAVEL LEISURE DL 01 on October 5, 2024 and sell it today you would earn a total of  1,448  from holding TRAVEL LEISURE DL 01 or generate 42.94% return on investment over 90 days.

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

Japan Asia Investment  vs.  TRAVEL LEISURE DL 01

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

TRAVEL LEISURE DL

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TRAVEL LEISURE DL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Asia and TRAVEL +

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

The idea behind Japan Asia Investment and TRAVEL LEISURE DL 01 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 Global Correlations module to find global opportunities by holding instruments from different markets.