Correlation Between JAPAN AIRLINES and EMCOR

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

By analyzing existing cross correlation between JAPAN AIRLINES and EMCOR Group, you can compare the effects of market volatilities on JAPAN AIRLINES and EMCOR 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 EMCOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and EMCOR.

Diversification Opportunities for JAPAN AIRLINES and EMCOR

0.57

Correlation Coefficient

JAPAN AIRLINES  EMCOR

Very weak diversification

The 3 months correlation between JAPAN and EMCOR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and EMCOR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCOR Group 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 EMCOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCOR Group has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and EMCOR go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and EMCOR

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 6.58 times less return on investment than EMCOR. But when comparing it to its historical volatility, JAPAN AIRLINES is 1.26 times less risky than EMCOR. It trades about 0.06 of its potential returns per unit of risk. EMCOR Group is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  33,575  in EMCOR Group on April 24, 2025 and sell it today you would earn a total of  14,145  from holding EMCOR Group or generate 42.13% return on investment over 90 days.

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

JAPAN AIRLINES  vs.  EMCOR Group

JAPAN AIRLINES

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

EMCOR Group

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMCOR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and EMCOR

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

The idea behind JAPAN AIRLINES and EMCOR Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.