Correlation Between Japan Tobacco and First Watch
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and First Watch 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 First Watch 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 First Watch Restaurant, you can compare the effects of market volatilities on Japan Tobacco and First Watch 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 First Watch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and First Watch.
Diversification Opportunities for Japan Tobacco and First Watch
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Japan and First is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and First Watch Restaurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Watch Restaurant 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 First Watch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Watch Restaurant has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and First Watch go up and down completely randomly.
Pair Corralation between Japan Tobacco and First Watch
Assuming the 90 days horizon Japan Tobacco is expected to generate 1.24 times less return on investment than First Watch. But when comparing it to its historical volatility, Japan Tobacco ADR is 2.32 times less risky than First Watch. It trades about 0.03 of its potential returns per unit of risk. First Watch Restaurant is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,900 in First Watch Restaurant on September 2, 2024 and sell it today you would earn a total of 9.00 from holding First Watch Restaurant or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco ADR vs. First Watch Restaurant
Performance |
| Timeline |
| Japan Tobacco ADR |
| First Watch Restaurant |
Japan Tobacco and First Watch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and First Watch
The main advantage of trading using opposite Japan Tobacco and First Watch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, First Watch 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 First Watch will offset losses from the drop in First Watch'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 |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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