Correlation Between Japan Post and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both Japan Post and IMPERIAL 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 Japan Post and IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Post Insurance and IMPERIAL TOBACCO , you can compare the effects of market volatilities on Japan Post and IMPERIAL 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 Japan Post with a short position of IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and IMPERIAL TOBACCO.
Diversification Opportunities for Japan Post and IMPERIAL TOBACCO
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Japan and IMPERIAL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and Japan Post 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 Post Insurance are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of Japan Post i.e., Japan Post and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between Japan Post and IMPERIAL TOBACCO
Assuming the 90 days trading horizon Japan Post is expected to generate 1.3 times less return on investment than IMPERIAL TOBACCO. In addition to that, Japan Post is 1.25 times more volatile than IMPERIAL TOBACCO . It trades about 0.18 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.28 per unit of volatility. If you would invest 3,131 in IMPERIAL TOBACCO on November 6, 2024 and sell it today you would earn a total of 156.00 from holding IMPERIAL TOBACCO or generate 4.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Japan Post Insurance vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| Japan Post Insurance |
| IMPERIAL TOBACCO |
Japan Post and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Post and IMPERIAL TOBACCO
The main advantage of trading using opposite Japan Post and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post position performs unexpectedly, IMPERIAL 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| Japan Post vs. Texas Roadhouse | Japan Post vs. Nishi Nippon Railroad Co | Japan Post vs. Planet Fitness | Japan Post vs. PURETECH HEALTH PLC |
| IMPERIAL TOBACCO vs. Jacquet Metal Service | IMPERIAL TOBACCO vs. Yuexiu Transport Infrastructure | IMPERIAL TOBACCO vs. COPLAND ROAD CAPITAL | IMPERIAL TOBACCO vs. Broadcom |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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