Correlation Between Japan Tobacco and RLX Technology
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and RLX Technology 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 Tobacco and RLX Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and RLX Technology, you can compare the effects of market volatilities on Japan Tobacco and RLX Technology 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 Tobacco with a short position of RLX Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and RLX Technology.
Diversification Opportunities for Japan Tobacco and RLX Technology
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Japan and RLX is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology and Japan Tobacco 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 Japan Tobacco are associated (or correlated) with RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and RLX Technology go up and down completely randomly.
Pair Corralation between Japan Tobacco and RLX Technology
Assuming the 90 days horizon Japan Tobacco is expected to generate 1.26 times more return on investment than RLX Technology. However, Japan Tobacco is 1.26 times more volatile than RLX Technology. It trades about 0.17 of its potential returns per unit of risk. RLX Technology is currently generating about 0.15 per unit of risk. If you would invest 2,620 in Japan Tobacco on August 28, 2024 and sell it today you would earn a total of 282.00 from holding Japan Tobacco or generate 10.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco vs. RLX Technology
Performance |
| Timeline |
| Japan Tobacco |
| RLX Technology |
Japan Tobacco and RLX Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and RLX Technology
The main advantage of trading using opposite Japan Tobacco and RLX Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, RLX Technology 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 RLX Technology will offset losses from the drop in RLX Technology's long position.| Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology | Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Turning Point Brands |
| RLX Technology vs. Bellring Brands LLC | RLX Technology vs. Ingredion Incorporated | RLX Technology vs. Nomad Foods | RLX Technology vs. Simply Good Foods |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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