Correlation Between Corporate Office and JAPAN AIRLINES

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

By analyzing existing cross correlation between Corporate Office Properties and JAPAN AIRLINES, you can compare the effects of market volatilities on Corporate Office and JAPAN AIRLINES 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 Corporate Office with a short position of JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Office and JAPAN AIRLINES.

Diversification Opportunities for Corporate Office and JAPAN AIRLINES

-0.56

Correlation Coefficient

Corporate Office  JAPAN AIRLINES

Excellent diversification

The 3 months correlation between Corporate and JAPAN is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Office Properties and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES and Corporate Office 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 Corporate Office Properties are associated (or correlated) with JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of Corporate Office i.e., Corporate Office and JAPAN AIRLINES go up and down completely randomly.

Pair Corralation between Corporate Office and JAPAN AIRLINES

Assuming the 90 days horizon Corporate Office Properties is expected to under-perform the JAPAN AIRLINES. But the stock apears to be less risky and, when comparing its historical volatility, Corporate Office Properties is 1.16 times less risky than JAPAN AIRLINES. The stock trades about -0.47 of its potential returns per unit of risk. The JAPAN AIRLINES is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,650  in JAPAN AIRLINES on December 10, 2024 and sell it today you would lose (10.00) from holding JAPAN AIRLINES or give up 0.61% of portfolio value over 90 days.

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

Corporate Office Properties  vs.  JAPAN AIRLINES

Corporate Office Pro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

JAPAN AIRLINES

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Corporate Office and JAPAN AIRLINES

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

The idea behind Corporate Office Properties and JAPAN AIRLINES 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.