Correlation Between Japan Tobacco and Altria
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Altria 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 Altria 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 Altria Group, you can compare the effects of market volatilities on Japan Tobacco and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Altria.
Diversification Opportunities for Japan Tobacco and Altria
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Altria is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Altria go up and down completely randomly.
Pair Corralation between Japan Tobacco and Altria
Assuming the 90 days horizon Japan Tobacco ADR is expected to under-perform the Altria. In addition to that, Japan Tobacco is 1.22 times more volatile than Altria Group. It trades about -0.02 of its total potential returns per unit of risk. Altria Group is currently generating about 0.18 per unit of volatility. If you would invest 4,365 in Altria Group on August 24, 2024 and sell it today you would earn a total of 1,238 from holding Altria Group or generate 28.36% 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. Altria Group
Performance |
| Timeline |
| Japan Tobacco ADR |
| Altria Group |
Japan Tobacco and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and Altria
The main advantage of trading using opposite Japan Tobacco and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria'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 |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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