Correlation Between Japan Medical and USWE SPORTS

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

By analyzing existing cross correlation between Japan Medical Dynamic and USWE SPORTS AB, you can compare the effects of market volatilities on Japan Medical and USWE SPORTS 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 Medical with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Medical and USWE SPORTS.

Diversification Opportunities for Japan Medical and USWE SPORTS

0.48

Correlation Coefficient

Japan Medical  USWE SPORTS

Very weak diversification

The 3 months correlation between Japan and USWE is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and Japan Medical 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 Medical Dynamic are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of Japan Medical i.e., Japan Medical and USWE SPORTS go up and down completely randomly.

Pair Corralation between Japan Medical and USWE SPORTS

Assuming the 90 days horizon Japan Medical Dynamic is expected to under-perform the USWE SPORTS. But the stock apears to be less risky and, when comparing its historical volatility, Japan Medical Dynamic is 1.48 times less risky than USWE SPORTS. The stock trades about -0.03 of its potential returns per unit of risk. The USWE SPORTS AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  76.00  in USWE SPORTS AB on November 28, 2024 and sell it today you would earn a total of  5.00  from holding USWE SPORTS AB or generate 6.58% return on investment over 90 days.

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

Japan Medical Dynamic  vs.  USWE SPORTS AB

Japan Medical Dynamic

Risk-Adjusted Performance

Very Weak

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

USWE SPORTS AB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, USWE SPORTS may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Japan Medical and USWE SPORTS

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

The idea behind Japan Medical Dynamic and USWE SPORTS AB 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.