Correlation Between JAPAN POST and Hang Seng

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

By analyzing existing cross correlation between JAPAN POST BANK and Hang Seng Bank, you can compare the effects of market volatilities on JAPAN POST and Hang Seng 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 Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN POST and Hang Seng.

Diversification Opportunities for JAPAN POST and Hang Seng

0.45

Correlation Coefficient

JAPAN POST  Hang Seng

Very weak diversification

The 3 months correlation between JAPAN and Hang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN POST BANK and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 BANK are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of JAPAN POST i.e., JAPAN POST and Hang Seng go up and down completely randomly.

Pair Corralation between JAPAN POST and Hang Seng

Assuming the 90 days horizon JAPAN POST BANK is expected to generate 2.24 times more return on investment than Hang Seng. However, JAPAN POST is 2.24 times more volatile than Hang Seng Bank. It trades about 0.08 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.13 per unit of risk. If you would invest  920.00  in JAPAN POST BANK on December 28, 2024 and sell it today you would earn a total of  151.00  from holding JAPAN POST BANK or generate 16.41% return on investment over 90 days.

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

JAPAN POST BANK  vs.  Hang Seng Bank

JAPAN POST BANK

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN POST BANK are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, JAPAN POST reported solid returns over the last few months and may actually be approaching a breakup point.

Hang Seng Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hang Seng showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN POST and Hang Seng

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

The idea behind JAPAN POST BANK and Hang Seng Bank 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.