Correlation Between Japan Post and Queens Road

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

By analyzing existing cross correlation between Japan Post Holdings and Queens Road Capital, you can compare the effects of market volatilities on Japan Post and Queens Road 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 Queens Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Queens Road.

Diversification Opportunities for Japan Post and Queens Road

Very weak diversification

The 3 months correlation between Japan and Queens is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Holdings and Queens Road Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queens Road Capital 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 Holdings are associated (or correlated) with Queens Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queens Road Capital has no effect on the direction of Japan Post i.e., Japan Post and Queens Road go up and down completely randomly.

Pair Corralation between Japan Post and Queens Road

Assuming the 90 days horizon Japan Post is expected to generate 1.09 times less return on investment than Queens Road. But when comparing it to its historical volatility, Japan Post Holdings is 1.34 times less risky than Queens Road. It trades about 0.26 of its potential returns per unit of risk. Queens Road Capital is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Queens Road Capital on June 24, 2023 and sell it today you would earn a total of  5.00  from holding Queens Road Capital or generate 10.64% return on investment over 90 days.

Japan Post Holdings  vs.  Queens Road Capital

Japan Post Holdings

Japan Performance

11 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in October 2023.

Queens Road Capital

Queens Performance

9 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Queens Road Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Queens Road may actually be approaching a critical reversion point that can send shares even higher in October 2023.

Pair Trading with Japan Post and Queens Road

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

The idea behind Japan Post Holdings and Queens Road Capital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.