Correlation Between Japan Tobacco and Cheniere Energy
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Cheniere 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 Cheniere 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 Cheniere Energy Partners, you can compare the effects of market volatilities on Japan Tobacco and Cheniere 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 Cheniere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Cheniere Energy.
Diversification Opportunities for Japan Tobacco and Cheniere Energy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Cheniere is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Cheniere Energy go up and down completely randomly.
Pair Corralation between Japan Tobacco and Cheniere Energy
Assuming the 90 days horizon Japan Tobacco is expected to generate 2.29 times less return on investment than Cheniere Energy. But when comparing it to its historical volatility, Japan Tobacco ADR is 3.49 times less risky than Cheniere Energy. It trades about 0.27 of its potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,707 in Cheniere Energy Partners on November 9, 2024 and sell it today you would earn a total of 557.00 from holding Cheniere Energy Partners or generate 9.76% 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. Cheniere Energy Partners
Performance |
| Timeline |
| Japan Tobacco ADR |
| Cheniere Energy Partners |
Japan Tobacco and Cheniere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and Cheniere Energy
The main advantage of trading using opposite Japan Tobacco and Cheniere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Cheniere 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 Cheniere Energy will offset losses from the drop in Cheniere 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 |
| Cheniere Energy vs. Plains All American | Cheniere Energy vs. Genesis Energy LP | Cheniere Energy vs. Western Midstream Partners | Cheniere Energy vs. Hess Midstream Partners |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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