Correlation Between AEGEAN AIRLINES and Japan Tobacco

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Can any of the company-specific risk be diversified away by investing in both AEGEAN AIRLINES 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 AEGEAN AIRLINES and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AEGEAN AIRLINES and Japan Tobacco, you can compare the effects of market volatilities on AEGEAN AIRLINES 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 AEGEAN AIRLINES with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEGEAN AIRLINES and Japan Tobacco.

Diversification Opportunities for AEGEAN AIRLINES and Japan Tobacco

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between AEGEAN and Japan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and AEGEAN 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 AEGEAN AIRLINES 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 has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and Japan Tobacco go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and Japan Tobacco

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 1.09 times less return on investment than Japan Tobacco. But when comparing it to its historical volatility, AEGEAN AIRLINES is 1.1 times less risky than Japan Tobacco. It trades about 0.15 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,536  in Japan Tobacco on September 12, 2024 and sell it today you would earn a total of  114.00  from holding Japan Tobacco or generate 4.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

AEGEAN AIRLINES  vs.  Japan Tobacco

 Performance 
       Timeline  
AEGEAN AIRLINES 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Japan Tobacco 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Tobacco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

AEGEAN AIRLINES and Japan Tobacco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AEGEAN AIRLINES and Japan Tobacco

The main advantage of trading using opposite AEGEAN AIRLINES and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEGEAN AIRLINES 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.
The idea behind AEGEAN AIRLINES and Japan Tobacco 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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