Correlation Between Applied Materials and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Applied 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 Applied 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 Applied Materials and Japan Tobacco, you can compare the effects of market volatilities on Applied 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 Applied Materials with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Japan Tobacco.
Diversification Opportunities for Applied Materials and Japan Tobacco
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Applied and Japan is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Applied 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 Applied 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 Applied Materials i.e., Applied Materials and Japan Tobacco go up and down completely randomly.
Pair Corralation between Applied Materials and Japan Tobacco
Assuming the 90 days horizon Applied Materials is expected to generate 1.69 times more return on investment than Japan Tobacco. However, Applied Materials is 1.69 times more volatile than Japan Tobacco. It trades about 0.05 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.05 per unit of risk. If you would invest 12,436 in Applied Materials on September 1, 2024 and sell it today you would earn a total of 4,442 from holding Applied Materials or generate 35.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Japan Tobacco
Performance |
| Timeline |
| Applied Materials |
| Japan Tobacco |
Applied Materials and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Japan Tobacco
The main advantage of trading using opposite Applied Materials and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied 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.| Applied Materials vs. National Beverage Corp | Applied Materials vs. Austevoll Seafood ASA | Applied Materials vs. DICKER DATA LTD | Applied Materials vs. PUBLIC STORAGE PRFO |
| Japan Tobacco vs. Performance Food Group | Japan Tobacco vs. JJ SNACK FOODS | Japan Tobacco vs. MUTUIONLINE | Japan Tobacco vs. LIFEWAY FOODS |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |