Can You Win with Japanese Stocks by Looking at Last Night's US Market Movements? — Individual Stocks Through the Lens of Correlation Coefficients

For many individual investors, isn’t the first routine of the weekday morning to check the previous night’s US market?

The New York market closes in the early morning (5:00 AM to 6:00 AM) Japan time, and the Tokyo Stock Exchange opens about 3 to 4 hours later. Everyone has surely had the experience of watching Morning Satellite or social media timelines and feeling their expectations rise, thinking, ‘Nvidia surged last night, so I can make money by buying Advantest today,’ or ‘Micron was bought, so Kioxia should follow suit.’

However, when you actually face the market, many have had the bitter experience of ‘starting high due to the favorable US market sentiment, only to see the price slide down and end up losing money.’

How much does the previous night’s US stock market trend actually influence the next day’s Japanese stocks? And is it really possible to get ahead of those price movements to make a profit?

Based on price data for US-Japan sector and industry pairs (semiconductors, automobiles, construction machinery, steel, etc.) over the past three years (2023–2026), we will quantitatively verify the reality using correlation coefficients and regression analysis.

1. Conclusion: Information is almost 100% priced in by the 9:00 AM market open

First, we verified the relationship between the previous night’s US stock closing price change rate and the next morning’s Japanese stock ‘opening gap’ (the divergence rate from the previous day’s closing price to the 9:00 AM opening price).

The statistically derived conclusion is very clear. It is the fact that the previous night’s US stock movements are ‘extremely accurately and powerfully priced in’ to the Japanese stock opening price at 9:00 AM the next morning.

Looking at the gap correlation coefficients (Pearson correlation r) for major US-Japan pairs, a surprisingly high degree of linkage is confirmed.

• Semiconductor Index (SOXX) x Tokyo Electron (8035): Correlation r=+0.673

• Applied Materials (AMAT) x Tokyo Electron (8035): Correlation r=+0.625

• ASML x Disco (6146): Correlation r=+0.607

• KLA x Lasertec (6920): Correlation r=+0.536

• Nvidia (NVDA) x Advantest (6857): Correlation r=+0.524

• Micron (MU) x Kioxia (285A): Correlation r=+0.520

• Caterpillar (CAT) x Komatsu (6301): Correlation r=+0.441

In statistics, a relationship with a correlation coefficient exceeding 0.5 is considered a ‘clear, strong correlation.’ It can be seen that all pairs, especially semiconductor stocks, are linked at an astronomical significance level.

Furthermore, when calculating sensitivity (beta value), it is generally around 0.5 to 0.6, which means the calculation holds that ‘if a US peer company rises by +3% the previous night, the next morning’s Japanese stock will open with a gap-up of approximately +1.5% to +1.8%.’

Although there is a time lag of several hours between the Japanese and US markets, in today’s global market, information about US stock fluctuations is fully digested the moment trading begins through overnight futures trading and order book information (indicative prices) available from 8:00 AM.

2. Why can’t you win just by ‘buying at the open’? — The wall of zero intraday correlation

This is where we get to the main point. Can you make a profit during the day with the simple investment idea of “seeing that US stocks rose the previous night and buying Japanese stocks at the 9:00 AM market open the next morning”?

To find the answer to this question, I measured the correlation between the “intraday return from the next morning’s opening price to the closing price” and the previous night’s US stock return.

The results revealed that for almost all high-tech and semiconductor stocks, the intraday correlation converges to “nearly zero (no correlation).”

• Micron x Kioxia: Intraday correlation r = -0.045 (no significant difference)

• NVIDIA x Advantest: Intraday correlation r = -0.015 (no significant difference)

• AMAT x Tokyo Electron: Intraday correlation r = -0.037 (no significant difference)

• ASML x Disco: Intraday correlation r = -0.013 (no significant difference)

A correlation coefficient of zero means that “no matter how much US stocks rose the previous night, it has no impact on the price movement during the day from 9:00 AM to 3:30 PM.”

Why does this phenomenon occur?

The reason is simple: the majority of the return gained from the positive news of a US stock rise is 100% captured at the stage of the “opening gap-up” at 9:00 AM.

A stock that starts high has already lost the material to rise further. On the contrary, immediately after the opening, it is easily pressured by profit-taking sales from investors who held positions overnight, and there is even an increased risk of being caught in what is called a “morning peak (a pattern where the price stalls after a high morning).”

The intuition that “because US stocks rose last night, Japanese stocks will continue to rise during the day” is shattered by the market’s rapid price-incorporation function (the principle of an efficient market).

3. The Paradox Revealed by Data: “Opening-Low Rebound” the Morning After a US Plunge

So, is the previous night’s US stock data completely useless for trading? In fact, if you dig deeper into the data and focus on “extreme decline phases,” an interesting market distortion (anomaly) emerges.

When tracking the behavior of Japanese stocks on the morning after a day when US stocks plunged by -2% to -3% or more the previous night, price action is observed that is the exact opposite of many investors’ intuition.

Selling by individual investors and risk management departments who feel fear upon seeing the US stock plunge concentrates at the 9:00 AM opening, causing the Japanese stock’s opening price to be sold down more than is justified by reality (panic gap-down).

However, once trading begins and the excessive panic subsides, dip-buying by large investors who judge that “it was sold too much first thing in the morning” and profit-taking buybacks (short covering) by short sellers flow in. As a result, it becomes easy to perform an “opening-low (a pattern where the opening price is the low and the price rises during the day).”

Conversely, if you take the trend-following action of being frightened by the news of a US stock plunge and “short-selling Japanese stocks that started low in the morning at the opening,” data proves that the probability of being hit by the subsequent autonomous rebound and suffering painful losses is extremely high.

4. Differences by Sector: “Immediate Digestion” in Tech vs. “Delayed Permeation” in Materials and Cyclicals

The speed of market reaction is not uniform across all industries. There is a clear difference in the speed of information permeation between highly liquid tech stocks like semiconductors and traditional materials or cyclical sectors.

A typical example is the pair of steel giants Nucor (NUE) and Nippon Steel (5401).

• Nucor x Nippon Steel: Gap Correlation r=+0.329

• Nucor x Nippon Steel: Intraday Correlation r=+0.108 (Highly significant trend-following momentum at the 0.1% level)

While the intraday correlation for semiconductor stocks was zero, in the steel sector, the rise in US stocks the previous night continues to have a statistically clear positive impact on the next day’s intraday returns. A similar moderate trend-following tendency is confirmed between construction machinery giants Caterpillar and Komatsu (6301).

Because tech stocks are under the surveillance of global institutional investors and high-frequency trading (HFT) algorithms, information is instantly reflected in the opening price in millisecond increments.

On the other hand, heavy industry sectors like materials and machinery do not have the same level of algorithmic concentration as tech, and domestic institutional investors and real-demand money gradually adjust their positions throughout the day. As a result, a “time lag” occurs in the ripple effect of information, creating a structure where trends are more likely to persist in the same direction during the day.

Summary: A Perspective for Calmly Applying US Stock Trends to Trading

The lessons learned from this verification can be summarized into the following three points.

• Avoid jumping into trades at 9:00 AM The rise in US tech stocks is almost entirely priced into the opening quote. Even if you jump into a stock that starts high, there is little room for intraday gains, and the risk of a correction after the opening high increases.

• Pay attention to the “opening low” caused by excessive pessimism The moment when stocks are excessively sold off first thing in the morning due to a sharp drop in US stocks is the point where intraday buying back or autonomous rebounds are most likely to function. It is wise to avoid chasing selling at a low opening during a panic.

• Be aware of the “information digestion speed” for each sector The time horizon for price movements differs between tech semiconductor stocks, which are priced in instantly, and materials/heavy industry stocks, where the impact ripples gradually throughout the day.

Instead of being captivated only by the superficial result of “whether last night’s US stocks went up or down,” objectively observe when and to what extent the market is pricing in that information. This should serve as a reliable perspective for capturing the distortions lurking between the waves of the Japanese and US markets and making calm investment decisions.

[Disclaimer and Investment Notes]

This article is intended for objective statistical analysis and information provision based on past market data and does not recommend or solicit the buying or selling of specific securities or individual trading methods. Past correlations or statistical trends do not guarantee or imply future market movements or investment results. Please ensure that you make actual investment decisions and manage your funds at your own risk, after fully considering the market environment and your own risk tolerance.

#StockInvestment #USStocks #JapaneseStocks #CorrelationCoefficient #SemiconductorStocks #Kioxia #Advantest #TokyoElectron #Anomaly #QuantAnalysis