Correlation Between Kajima Corp and JGC Corp

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

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

Diversification Opportunities for Kajima Corp and JGC Corp

0.58

Correlation Coefficient

Kajima Corp  JGC Corp

Very weak diversification

The 3 months correlation between Kajima and JGC is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kajima Corp ADR and JGC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JGC Corp and Kajima Corp 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 Kajima Corp ADR are associated (or correlated) with JGC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JGC Corp has no effect on the direction of Kajima Corp i.e., Kajima Corp and JGC Corp go up and down completely randomly.

Pair Corralation between Kajima Corp and JGC Corp

Assuming the 90 days horizon Kajima Corp ADR is expected to generate 1.05 times more return on investment than JGC Corp. However, Kajima Corp is 1.05 times more volatile than JGC Corp. It trades about 0.03 of its potential returns per unit of risk. JGC Corp is currently generating about -0.03 per unit of risk. If you would invest  1,608  in Kajima Corp ADR on September 4, 2024 and sell it today you would earn a total of  142.00  from holding Kajima Corp ADR or generate 8.83% return on investment over 90 days.

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

Kajima Corp ADR  vs.  JGC Corp

Kajima Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

JGC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kajima Corp and JGC Corp

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

The idea behind Kajima Corp ADR and JGC Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..