Correlation Between Japan Smaller and Korea Closed

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

By analyzing existing cross correlation between Japan Smaller Capitalization and Korea Closed, you can compare the effects of market volatilities on Japan Smaller and Korea Closed 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 Smaller with a short position of Korea Closed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Smaller and Korea Closed.

Diversification Opportunities for Japan Smaller and Korea Closed

0.72

Correlation Coefficient

Japan Smaller  Korea Closed

Poor diversification

The 3 months correlation between Japan and Korea is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Japan Smaller Capitalization and Korea Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Closed and Japan Smaller 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 Smaller Capitalization are associated (or correlated) with Korea Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Closed has no effect on the direction of Japan Smaller i.e., Japan Smaller and Korea Closed go up and down completely randomly.

Pair Corralation between Japan Smaller and Korea Closed

Considering the 90-day investment horizon Japan Smaller Capitalization is expected to generate 0.78 times more return on investment than Korea Closed. However, Japan Smaller Capitalization is 1.28 times less risky than Korea Closed. It trades about 0.21 of its potential returns per unit of risk. Korea Closed is currently generating about 0.15 per unit of risk. If you would invest  750.00  in Japan Smaller Capitalization on December 23, 2024 and sell it today you would earn a total of  93.00  from holding Japan Smaller Capitalization or generate 12.4% return on investment over 90 days.

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

Japan Smaller Capitalization  vs.  Korea Closed

Japan Smaller Capita

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Smaller Capitalization are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly fragile basic indicators, Japan Smaller may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Korea Closed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Korea Closed are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Korea Closed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Japan Smaller and Korea Closed

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

The idea behind Japan Smaller Capitalization and Korea Closed 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.