Correlation Between JGC Corp and Kajima Corp

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

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

Diversification Opportunities for JGC Corp and Kajima Corp

0.59

Correlation Coefficient

JGC Corp  Kajima Corp

Very weak diversification

The 3 months correlation between JGC and Kajima is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding JGC Corp and Kajima Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kajima Corp ADR and JGC 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 JGC Corp are associated (or correlated) with Kajima Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kajima Corp ADR has no effect on the direction of JGC Corp i.e., JGC Corp and Kajima Corp go up and down completely randomly.

Pair Corralation between JGC Corp and Kajima Corp

Assuming the 90 days horizon JGC Corp is expected to generate 0.71 times more return on investment than Kajima Corp. However, JGC Corp is 1.41 times less risky than Kajima Corp. It trades about -0.02 of its potential returns per unit of risk. Kajima Corp ADR is currently generating about -0.03 per unit of risk. If you would invest  1,750  in JGC Corp on September 2, 2024 and sell it today you would lose (57.00) from holding JGC Corp or give up 3.26% of portfolio value over 90 days.

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

JGC Corp  vs.  Kajima Corp ADR

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.

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.

Pair Trading with JGC Corp and Kajima Corp

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

The idea behind JGC Corp and Kajima Corp ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.