Correlation Between Cboe Global and JAPAN EX

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

By analyzing existing cross correlation between Cboe Global Markets and JAPAN EX UNADR, you can compare the effects of market volatilities on Cboe Global and JAPAN EX 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 Cboe Global with a short position of JAPAN EX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe Global and JAPAN EX.

Diversification Opportunities for Cboe Global and JAPAN EX

-0.23

Correlation Coefficient

Cboe Global  JAPAN EX

Very good diversification

The 3 months correlation between Cboe and JAPAN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Global Markets and JAPAN EX UNADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN EX UNADR and Cboe Global 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 Cboe Global Markets are associated (or correlated) with JAPAN EX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN EX UNADR has no effect on the direction of Cboe Global i.e., Cboe Global and JAPAN EX go up and down completely randomly.

Pair Corralation between Cboe Global and JAPAN EX

Assuming the 90 days horizon Cboe Global is expected to generate 1.14 times less return on investment than JAPAN EX. But when comparing it to its historical volatility, Cboe Global Markets is 1.36 times less risky than JAPAN EX. It trades about 0.06 of its potential returns per unit of risk. JAPAN EX UNADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  824.00  in JAPAN EX UNADR on September 26, 2024 and sell it today you would earn a total of  226.00  from holding JAPAN EX UNADR or generate 27.43% return on investment over 90 days.

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

Cboe Global Markets  vs.  JAPAN EX UNADR

Cboe Global Markets

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cboe Global Markets are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cboe Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

JAPAN EX UNADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN EX UNADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, JAPAN EX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cboe Global and JAPAN EX

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

The idea behind Cboe Global Markets and JAPAN EX UNADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.