Correlation Between CenterPoint Energy and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy 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 CenterPoint Energy and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and Japan Tobacco ADR, you can compare the effects of market volatilities on CenterPoint Energy 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 CenterPoint Energy with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Japan Tobacco.
Diversification Opportunities for CenterPoint Energy and Japan Tobacco
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CenterPoint and Japan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR and CenterPoint Energy 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 CenterPoint Energy 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 ADR has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Japan Tobacco go up and down completely randomly.
Pair Corralation between CenterPoint Energy and Japan Tobacco
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.41 times more return on investment than Japan Tobacco. However, CenterPoint Energy is 1.41 times more volatile than Japan Tobacco ADR. It trades about 0.34 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.08 per unit of risk. If you would invest 2,933 in CenterPoint Energy on September 1, 2024 and sell it today you would earn a total of 329.00 from holding CenterPoint Energy or generate 11.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. Japan Tobacco ADR
Performance |
| Timeline |
| CenterPoint Energy |
| Japan Tobacco ADR |
CenterPoint Energy and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and Japan Tobacco
The main advantage of trading using opposite CenterPoint Energy and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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.| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology | Japan Tobacco vs. British American Tobacco |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |