Correlation Between Cummins and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both Cummins 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 Cummins and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cummins and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on Cummins 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 Cummins with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cummins and JAPAN TOBACCO.
Diversification Opportunities for Cummins and JAPAN TOBACCO
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cummins and JAPAN is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cummins and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and Cummins 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 Cummins 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 UNSPADR12 has no effect on the direction of Cummins i.e., Cummins and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between Cummins and JAPAN TOBACCO
Assuming the 90 days horizon Cummins is expected to generate 1.57 times more return on investment than JAPAN TOBACCO. However, Cummins is 1.57 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.08 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.07 per unit of risk. If you would invest 33,640 in Cummins on November 3, 2024 and sell it today you would earn a total of 930.00 from holding Cummins or generate 2.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cummins vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| Cummins |
| JAPAN TOBACCO UNSPADR12 |
Cummins and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cummins and JAPAN TOBACCO
The main advantage of trading using opposite Cummins and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cummins 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.| Cummins vs. OPKO HEALTH | Cummins vs. ASPEN TECHINC DL | Cummins vs. JAPAN TOBACCO UNSPADR12 | Cummins vs. WESANA HEALTH HOLD |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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