Correlation Between Auto Trader and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both Auto Trader and JAPAN TOBACCO 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 Auto Trader and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on Auto Trader and JAPAN TOBACCO 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 Auto Trader with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and JAPAN TOBACCO.
Diversification Opportunities for Auto Trader and JAPAN TOBACCO
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Auto and JAPAN is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and Auto Trader 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 Auto Trader Group are associated (or correlated) with JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of Auto Trader i.e., Auto Trader and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between Auto Trader and JAPAN TOBACCO
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the JAPAN TOBACCO. In addition to that, Auto Trader is 1.08 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.06 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about -0.03 per unit of volatility. If you would invest 1,270 in JAPAN TOBACCO UNSPADR12 on August 28, 2024 and sell it today you would lose (30.00) from holding JAPAN TOBACCO UNSPADR12 or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Auto Trader Group vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| Auto Trader Group |
| JAPAN TOBACCO UNSPADR12 |
Auto Trader and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and JAPAN TOBACCO
The main advantage of trading using opposite Auto Trader and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc |
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 the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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