Correlation Between Summit Materials and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Summit Materials 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 Summit Materials and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Japan Tobacco, you can compare the effects of market volatilities on Summit Materials 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 Summit Materials with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Japan Tobacco.
Diversification Opportunities for Summit Materials and Japan Tobacco
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Summit and Japan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Japan Tobacco go up and down completely randomly.
Pair Corralation between Summit Materials and Japan Tobacco
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.72 times more return on investment than Japan Tobacco. However, Summit Materials is 1.72 times more volatile than Japan Tobacco. It trades about 0.23 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.13 per unit of risk. If you would invest 4,220 in Summit Materials on August 29, 2024 and sell it today you would earn a total of 620.00 from holding Summit Materials or generate 14.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Japan Tobacco
Performance |
| Timeline |
| Summit Materials |
| Japan Tobacco |
Summit Materials and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Japan Tobacco
The main advantage of trading using opposite Summit Materials and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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.| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
| Japan Tobacco vs. Applied Materials | Japan Tobacco vs. SANOK RUBBER ZY | Japan Tobacco vs. Entravision Communications | Japan Tobacco vs. Universal Display |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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