Correlation Between JAPAN AIRLINES and BP Plc

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and BP Plc 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 AIRLINES and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and BP plc, you can compare the effects of market volatilities on JAPAN AIRLINES and BP Plc 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 AIRLINES with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and BP Plc.

Diversification Opportunities for JAPAN AIRLINES and BP Plc

JAPANBSUDiversified AwayJAPANBSUDiversified Away100%
0.23
  Correlation Coefficient

Modest diversification

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

Pair Corralation between JAPAN AIRLINES and BP Plc

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 0.8 times more return on investment than BP Plc. However, JAPAN AIRLINES is 1.25 times less risky than BP Plc. It trades about 0.0 of its potential returns per unit of risk. BP plc is currently generating about -0.05 per unit of risk. If you would invest  1,550  in JAPAN AIRLINES on September 21, 2024 and sell it today you would lose (10.00) from holding JAPAN AIRLINES or give up 0.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.46%
ValuesDaily Returns

JAPAN AIRLINES  vs.  BP plc

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15JAL BSU
       Timeline  
JAPAN AIRLINES 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JAPAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec14.51515.516
BP plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BP Plc is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec26.52727.52828.52929.5

JAPAN AIRLINES and BP Plc Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.09-3.06-2.03-1.01-0.01711.02.033.064.095.12 0.050.100.150.20
JavaScript chart by amCharts 3.21.15JAL BSU
       Returns  

Pair Trading with JAPAN AIRLINES and BP Plc

The main advantage of trading using opposite JAPAN AIRLINES and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.
The idea behind JAPAN AIRLINES and BP plc 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

Other Complementary Tools

Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Top Crypto Exchanges
Search and analyze digital assets across top global cryptocurrency exchanges
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation