Correlation Between Japan Real and Amadeus IT

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

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

Diversification Opportunities for Japan Real and Amadeus IT

-0.45

Correlation Coefficient

Japan Real  Amadeus IT

Very good diversification

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

Pair Corralation between Japan Real and Amadeus IT

Assuming the 90 days horizon Japan Real Estate is expected to under-perform the Amadeus IT. In addition to that, Japan Real is 1.29 times more volatile than Amadeus IT Group. It trades about -0.3 of its total potential returns per unit of risk. Amadeus IT Group is currently generating about -0.06 per unit of volatility. If you would invest  6,878  in Amadeus IT Group on October 5, 2024 and sell it today you would lose (72.00) from holding Amadeus IT Group or give up 1.05% of portfolio value over 90 days.

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

Japan Real Estate  vs.  Amadeus IT Group

Japan Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Amadeus IT Group

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Japan Real and Amadeus IT

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

The idea behind Japan Real Estate and Amadeus IT Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.