Correlation Between Japan Airport and Aeroports

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

By analyzing existing cross correlation between Japan Airport Terminal and Aeroports de Paris, you can compare the effects of market volatilities on Japan Airport and Aeroports 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 Airport with a short position of Aeroports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Airport and Aeroports.

Diversification Opportunities for Japan Airport and Aeroports

-0.47

Correlation Coefficient

Japan Airport  Aeroports

Very good diversification

The 3 months correlation between Japan and Aeroports is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Japan Airport Terminal and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris and Japan Airport 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 Airport Terminal are associated (or correlated) with Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Japan Airport i.e., Japan Airport and Aeroports go up and down completely randomly.

Pair Corralation between Japan Airport and Aeroports

Assuming the 90 days horizon Japan Airport Terminal is expected to under-perform the Aeroports. But the pink sheet apears to be less risky and, when comparing its historical volatility, Japan Airport Terminal is 1.23 times less risky than Aeroports. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Aeroports de Paris is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Aeroports de Paris on December 30, 2024 and sell it today you would earn a total of  74.00  from holding Aeroports de Paris or generate 6.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Japan Airport Terminal  vs.  Aeroports de Paris

Japan Airport Terminal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Airport Terminal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aeroports de Paris

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeroports de Paris are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Aeroports may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Japan Airport and Aeroports

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

The idea behind Japan Airport Terminal and Aeroports de Paris 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.