Correlation Between Japan Airlines and Western Copper

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

By analyzing existing cross correlation between Japan Airlines Ltd and Western Copper and, you can compare the effects of market volatilities on Japan Airlines and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Airlines and Western Copper.

Diversification Opportunities for Japan Airlines and Western Copper

0.0

Correlation Coefficient

Japan Airlines  Western Copper

Pay attention - limited upside

The 3 months correlation between Japan and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Japan Airlines Ltd and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Ltd are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Japan Airlines i.e., Japan Airlines and Western Copper go up and down completely randomly.

Pair Corralation between Japan Airlines and Western Copper

If you would invest  101.00  in Western Copper and on December 21, 2024 and sell it today you would earn a total of  14.00  from holding Western Copper and or generate 13.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Japan Airlines Ltd  vs.  Western Copper and

Japan Airlines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Airlines Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Japan Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Copper

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Copper and are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Western Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Airlines and Western Copper

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

The idea behind Japan Airlines Ltd and Western Copper and 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.