Correlation Between Japan Exchange and Brambles

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

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

Diversification Opportunities for Japan Exchange and Brambles

-0.18

Correlation Coefficient

Japan Exchange  Brambles

Good diversification

The 3 months correlation between Japan and Brambles is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Japan Exchange Group and Brambles Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brambles ADR and Japan Exchange 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 Exchange Group are associated (or correlated) with Brambles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brambles ADR has no effect on the direction of Japan Exchange i.e., Japan Exchange and Brambles go up and down completely randomly.

Pair Corralation between Japan Exchange and Brambles

Assuming the 90 days horizon Japan Exchange Group is expected to under-perform the Brambles. In addition to that, Japan Exchange is 1.27 times more volatile than Brambles Ltd ADR. It trades about -0.02 of its total potential returns per unit of risk. Brambles Ltd ADR is currently generating about 0.11 per unit of volatility. If you would invest  2,410  in Brambles Ltd ADR on December 21, 2024 and sell it today you would earn a total of  176.00  from holding Brambles Ltd ADR or generate 7.3% return on investment over 90 days.

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

Japan Exchange Group  vs.  Brambles Ltd ADR

Japan Exchange Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Exchange Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Japan Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Brambles ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brambles Ltd ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Brambles may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Japan Exchange and Brambles

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

The idea behind Japan Exchange Group and Brambles Ltd 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.

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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.