Just to be sure, the risk manager runs a regression of the Japanese stocks on U.S. stocks

Question:

Just to be sure, the risk manager runs a regression of the Japanese on U.S. and finds a slope coefficient of 0.9. Assuming that a shock of 20 percent originates from the United States, compute the predicted stress loss for the portfolio. What is the danger of this approach?
Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...