Correlation Between Fortescue Metals and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals 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 Fortescue Metals and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Japan Tobacco, you can compare the effects of market volatilities on Fortescue Metals 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 Fortescue Metals with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Japan Tobacco.
Diversification Opportunities for Fortescue Metals and Japan Tobacco
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fortescue and Japan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Fortescue Metals 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 Fortescue Metals Group 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 Fortescue Metals i.e., Fortescue Metals and Japan Tobacco go up and down completely randomly.
Pair Corralation between Fortescue Metals and Japan Tobacco
Assuming the 90 days horizon Fortescue Metals Group is expected to generate 1.41 times more return on investment than Japan Tobacco. However, Fortescue Metals is 1.41 times more volatile than Japan Tobacco. It trades about -0.04 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.19 per unit of risk. If you would invest 1,162 in Fortescue Metals Group on October 30, 2024 and sell it today you would lose (40.00) from holding Fortescue Metals Group or give up 3.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. Japan Tobacco
Performance |
| Timeline |
| Fortescue Metals |
| Japan Tobacco |
Fortescue Metals and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Japan Tobacco
The main advantage of trading using opposite Fortescue Metals and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals 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.| Fortescue Metals vs. THRACE PLASTICS | Fortescue Metals vs. Compagnie Plastic Omnium | Fortescue Metals vs. Heidelberg Materials AG | Fortescue Metals vs. Easy Software AG |
| Japan Tobacco vs. NEWELL RUBBERMAID | Japan Tobacco vs. Planet Fitness | Japan Tobacco vs. SANOK RUBBER ZY | Japan Tobacco vs. GOODYEAR T RUBBER |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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