Correlation Between Japan Real and National Grid
Can any of the company-specific risk be diversified away by investing in both Japan Real and National Grid 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 National Grid 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 National Grid PLC, you can compare the effects of market volatilities on Japan Real and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Real and National Grid.
Diversification Opportunities for Japan Real and National Grid
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Japan and National is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Japan Real Estate and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of Japan Real i.e., Japan Real and National Grid go up and down completely randomly.
Pair Corralation between Japan Real and National Grid
Assuming the 90 days horizon Japan Real Estate is expected to generate 0.37 times more return on investment than National Grid. However, Japan Real Estate is 2.67 times less risky than National Grid. It trades about -0.23 of its potential returns per unit of risk. National Grid PLC is currently generating about -0.15 per unit of risk. If you would invest 340,000 in Japan Real Estate on September 24, 2024 and sell it today you would lose (14,000) from holding Japan Real Estate or give up 4.12% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Japan Real Estate vs. National Grid PLC
Performance |
Timeline |
Japan Real Estate |
National Grid PLC |
Japan Real and National Grid Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Japan Real and National Grid
The main advantage of trading using opposite Japan Real and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Real position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.Japan Real vs. Digital Realty Trust | Japan Real vs. Gecina SA | Japan Real vs. SL Green Realty | Japan Real vs. ORIX JREIT INC |
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Check out your portfolio center.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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