Correlation Between Territorial Bancorp and Japan Post

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

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

Diversification Opportunities for Territorial Bancorp and Japan Post

0.11

Correlation Coefficient

Territorial Bancorp  Japan Post

Average diversification

The 3 months correlation between Territorial and Japan is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Japan Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Holdings and Territorial Bancorp 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 Territorial Bancorp are associated (or correlated) with Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Holdings has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and Japan Post go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Japan Post

Given the investment horizon of 90 days Territorial Bancorp is expected to generate 1.05 times more return on investment than Japan Post. However, Territorial Bancorp is 1.05 times more volatile than Japan Post Holdings. It trades about 0.09 of its potential returns per unit of risk. Japan Post Holdings is currently generating about -0.04 per unit of risk. If you would invest  944.00  in Territorial Bancorp on September 6, 2024 and sell it today you would earn a total of  129.00  from holding Territorial Bancorp or generate 13.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Territorial Bancorp  vs.  Japan Post Holdings

Territorial Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Territorial Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Territorial Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Japan Post Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Post Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Japan Post is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Territorial Bancorp and Japan Post

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

The idea behind Territorial Bancorp and Japan Post Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.