Correlation Between JGC Corp and Kajima Corp

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

By analyzing existing cross correlation between JGC Corp and Kajima Corp ADR, you can compare the effects of market volatilities on JGC Corp and Kajima Corp 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 JGC Corp with a short position of Kajima Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of JGC Corp and Kajima Corp.

Diversification Opportunities for JGC Corp and Kajima Corp

-0.4

Correlation Coefficient

JGC Corp  Kajima Corp

Very good diversification

The 3 months correlation between JGC and Kajima is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding JGC Corp and Kajima Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kajima Corp ADR and JGC Corp 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 JGC Corp are associated (or correlated) with Kajima Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kajima Corp ADR has no effect on the direction of JGC Corp i.e., JGC Corp and Kajima Corp go up and down completely randomly.

Pair Corralation between JGC Corp and Kajima Corp

Assuming the 90 days horizon JGC Corp is expected to generate 2.84 times less return on investment than Kajima Corp. In addition to that, JGC Corp is 1.03 times more volatile than Kajima Corp ADR. It trades about 0.03 of its total potential returns per unit of risk. Kajima Corp ADR is currently generating about 0.08 per unit of volatility. If you would invest  1,833  in Kajima Corp ADR on December 28, 2024 and sell it today you would earn a total of  309.00  from holding Kajima Corp ADR or generate 16.86% return on investment over 90 days.

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

JGC Corp  vs.  Kajima Corp ADR

JGC Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JGC Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, JGC Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kajima Corp ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kajima Corp ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Kajima Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JGC Corp and Kajima Corp

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

The idea behind JGC Corp and Kajima Corp ADR 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.