Correlation Between Hermès International and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Hermès International 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 Hermès International and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herms International Socit and Japan Tobacco, you can compare the effects of market volatilities on Hermès International 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 Hermès International with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hermès International and Japan Tobacco.
Diversification Opportunities for Hermès International and Japan Tobacco
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hermès and Japan is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Herms International Socit and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Hermès International 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 Herms International Socit 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 Hermès International i.e., Hermès International and Japan Tobacco go up and down completely randomly.
Pair Corralation between Hermès International and Japan Tobacco
Assuming the 90 days horizon Herms International Socit is expected to generate 1.2 times more return on investment than Japan Tobacco. However, Hermès International is 1.2 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 0.01 per unit of risk. If you would invest 197,460 in Herms International Socit on October 16, 2024 and sell it today you would earn a total of 36,140 from holding Herms International Socit or generate 18.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Herms International Socit vs. Japan Tobacco
Performance |
| Timeline |
| Herms International Socit |
| Japan Tobacco |
Hermès International and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hermès International and Japan Tobacco
The main advantage of trading using opposite Hermès International and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hermès International 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.| Hermès International vs. Japan Tobacco | Hermès International vs. IMPERIAL TOBACCO | Hermès International vs. Sun Life Financial | Hermès International vs. Synovus Financial Corp |
| Japan Tobacco vs. JD SPORTS FASH | Japan Tobacco vs. Fortescue Metals Group | Japan Tobacco vs. Perseus Mining Limited | Japan Tobacco vs. Osisko Metals |
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 Stocks Directory module to find actively traded stocks across global markets.
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