Correlation Between Japan Real and AIXTRON SE

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

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

Diversification Opportunities for Japan Real and AIXTRON SE

0.06

Correlation Coefficient

Japan Real  AIXTRON SE

Significant diversification

The 3 months correlation between Japan and AIXTRON is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Japan Real Estate and AIXTRON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIXTRON SE and Japan Real 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 Real Estate are associated (or correlated) with AIXTRON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIXTRON SE has no effect on the direction of Japan Real i.e., Japan Real and AIXTRON SE go up and down completely randomly.

Pair Corralation between Japan Real and AIXTRON SE

Assuming the 90 days horizon Japan Real is expected to generate 4.31 times less return on investment than AIXTRON SE. But when comparing it to its historical volatility, Japan Real Estate is 4.36 times less risky than AIXTRON SE. It trades about 0.17 of its potential returns per unit of risk. AIXTRON SE is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,214  in AIXTRON SE on March 1, 2025 and sell it today you would earn a total of  266.00  from holding AIXTRON SE or generate 12.01% return on investment over 90 days.

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

Japan Real Estate  vs.  AIXTRON SE

Japan Real Estate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Real Estate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Real may actually be approaching a critical reversion point that can send shares even higher in June 2025.

AIXTRON SE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIXTRON SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AIXTRON SE may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Japan Real and AIXTRON SE

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

The idea behind Japan Real Estate and AIXTRON SE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.