Correlation Between Japan Airlines and Appian Corp

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

Diversification Opportunities for Japan Airlines and Appian Corp

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Japan and Appian is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Japan Airlines Ltd and Appian Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appian Corp 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 Appian Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appian Corp has no effect on the direction of Japan Airlines i.e., Japan Airlines and Appian Corp go up and down completely randomly.

Pair Corralation between Japan Airlines and Appian Corp

Assuming the 90 days horizon Japan Airlines is expected to generate 8.88 times less return on investment than Appian Corp. But when comparing it to its historical volatility, Japan Airlines is 2.09 times less risky than Appian Corp. It trades about 0.03 of its potential returns per unit of risk. Appian Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Appian Corp on September 9, 2022 and sell it today you would earn a total of  294.00  from holding Appian Corp or generate 8.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Japan Airlines Ltd  vs.  Appian Corp

 Performance (%) 
       Timeline  
Japan Airlines 
Japan Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Japan Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Japan Airlines may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Japan Price Channel

Appian Corp 
Appian Performance
0 of 100
Over the last 90 days Appian Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Appian Price Channel

Japan Airlines and Appian Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Japan Airlines and Appian Corp

The main advantage of trading using opposite Japan Airlines and Appian Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Airlines position performs unexpectedly, Appian 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 Appian Corp will offset losses from the drop in Appian Corp's long position.
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The idea behind Japan Airlines and Appian Corp 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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