Correlation Between Japan Tobacco and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and CenterPoint Energy 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 CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco ADR and CenterPoint Energy, you can compare the effects of market volatilities on Japan Tobacco and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and CenterPoint Energy.
Diversification Opportunities for Japan Tobacco and CenterPoint Energy
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Japan and CenterPoint is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 ADR are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Japan Tobacco and CenterPoint Energy
Assuming the 90 days horizon Japan Tobacco ADR is expected to generate 0.95 times more return on investment than CenterPoint Energy. However, Japan Tobacco ADR is 1.06 times less risky than CenterPoint Energy. It trades about 0.05 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.04 per unit of risk. If you would invest 1,128 in Japan Tobacco ADR on September 1, 2024 and sell it today you would earn a total of 265.00 from holding Japan Tobacco ADR or generate 23.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco ADR vs. CenterPoint Energy
Performance |
| Timeline |
| Japan Tobacco ADR |
| CenterPoint Energy |
Japan Tobacco and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and CenterPoint Energy
The main advantage of trading using opposite Japan Tobacco and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology | Japan Tobacco vs. British American Tobacco |
| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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