Correlation Between British Amer and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both British Amer 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 British Amer and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Japan Tobacco, you can compare the effects of market volatilities on British Amer 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 British Amer with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Japan Tobacco.
Diversification Opportunities for British Amer and Japan Tobacco
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and Japan is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and British Amer 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 British American Tobacco 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 British Amer i.e., British Amer and Japan Tobacco go up and down completely randomly.
Pair Corralation between British Amer and Japan Tobacco
Considering the 90-day investment horizon British American Tobacco is expected to generate 0.44 times more return on investment than Japan Tobacco. However, British American Tobacco is 2.29 times less risky than Japan Tobacco. It trades about 0.08 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.03 per unit of risk. If you would invest 2,957 in British American Tobacco on August 24, 2024 and sell it today you would earn a total of 781.00 from holding British American Tobacco or generate 26.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.8% |
| Values | Daily Returns |
British American Tobacco vs. Japan Tobacco
Performance |
| Timeline |
| British American Tobacco |
| Japan Tobacco |
British Amer and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Japan Tobacco
The main advantage of trading using opposite British Amer and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer 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.| British Amer vs. Universal | British Amer vs. Imperial Brands PLC | British Amer vs. Philip Morris International | British Amer vs. Japan Tobacco ADR |
| Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Turning Point Brands | Japan Tobacco vs. Universal |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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