Correlation Between Japan Steel and British American
Can any of the company-specific risk be diversified away by investing in both Japan Steel and British American 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 Japan Steel and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Japan Steel and British American Tobacco, you can compare the effects of market volatilities on Japan Steel and British American 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 Japan Steel with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Steel and British American.
Diversification Opportunities for Japan Steel and British American
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Japan and British is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Japan Steel 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 The Japan Steel are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Japan Steel i.e., Japan Steel and British American go up and down completely randomly.
Pair Corralation between Japan Steel and British American
Assuming the 90 days horizon The Japan Steel is expected to generate 3.78 times more return on investment than British American. However, Japan Steel is 3.78 times more volatile than British American Tobacco. It trades about 0.09 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest 2,540 in The Japan Steel on October 26, 2024 and sell it today you would earn a total of 1,160 from holding The Japan Steel or generate 45.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Japan Steel vs. British American Tobacco
Performance |
| Timeline |
| Japan Steel |
| British American Tobacco |
Japan Steel and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Steel and British American
The main advantage of trading using opposite Japan Steel and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Steel position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Japan Steel vs. CDL INVESTMENT | Japan Steel vs. AOYAMA TRADING | Japan Steel vs. Corsair Gaming | Japan Steel vs. Air New Zealand |
| British American vs. Laureate Education | British American vs. TOMBADOR IRON LTD | British American vs. Urban Outfitters | British American vs. The Japan Steel |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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