Correlation Between Japan Post and L Catterton

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

By analyzing existing cross correlation between Japan Post Holdings and L Catterton Asia, you can compare the effects of market volatilities on Japan Post and L Catterton 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 Post with a short position of L Catterton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and L Catterton.

Diversification Opportunities for Japan Post and L Catterton

0.72

Correlation Coefficient

Japan Post  L Catterton

Poor diversification

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

Pair Corralation between Japan Post and L Catterton

Assuming the 90 days horizon Japan Post Holdings is expected to under-perform the L Catterton. In addition to that, Japan Post is 78.81 times more volatile than L Catterton Asia. It trades about -0.13 of its total potential returns per unit of risk. L Catterton Asia is currently generating about 0.05 per unit of volatility. If you would invest  1,007  in L Catterton Asia on September 19, 2024 and sell it today you would earn a total of  57.00  from holding L Catterton Asia or generate 5.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.58%
Values	Daily Returns

Japan Post Holdings  vs.  L Catterton Asia

Japan Post Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

L Catterton Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Catterton Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, L Catterton is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Japan Post and L Catterton

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

The idea behind Japan Post Holdings and L Catterton Asia 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.