Correlation Between Japan Post and CRRC

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

By analyzing existing cross correlation between Japan Post Insurance and CRRC Limited, you can compare the effects of market volatilities on Japan Post and CRRC 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 Post with a short position of CRRC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and CRRC.

Diversification Opportunities for Japan Post and CRRC

0.07

Correlation Coefficient

Japan Post  CRRC

Significant diversification

The 3 months correlation between Japan and CRRC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and CRRC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRRC Limited and Japan Post 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 Post Insurance are associated (or correlated) with CRRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRRC Limited has no effect on the direction of Japan Post i.e., Japan Post and CRRC go up and down completely randomly.

Pair Corralation between Japan Post and CRRC

Assuming the 90 days trading horizon Japan Post is expected to generate 1.18 times less return on investment than CRRC. But when comparing it to its historical volatility, Japan Post Insurance is 1.23 times less risky than CRRC. It trades about 0.07 of its potential returns per unit of risk. CRRC Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  56.00  in CRRC Limited on October 1, 2024 and sell it today you would earn a total of  5.00  from holding CRRC Limited or generate 8.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Japan Post Insurance  vs.  CRRC Limited

Japan Post Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CRRC Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CRRC Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CRRC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Japan Post and CRRC

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

The idea behind Japan Post Insurance and CRRC Limited 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.