Correlation Between Japan Tobacco and Wendys
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Wendys 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 Wendys 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 The Wendys Co, you can compare the effects of market volatilities on Japan Tobacco and Wendys 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 Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Wendys.
Diversification Opportunities for Japan Tobacco and Wendys
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Japan and Wendys is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys 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 Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Wendys go up and down completely randomly.
Pair Corralation between Japan Tobacco and Wendys
Assuming the 90 days horizon Japan Tobacco ADR is expected to generate 0.75 times more return on investment than Wendys. However, Japan Tobacco ADR is 1.33 times less risky than Wendys. It trades about 0.03 of its potential returns per unit of risk. The Wendys Co is currently generating about 0.01 per unit of risk. If you would invest 1,317 in Japan Tobacco ADR on September 2, 2024 and sell it today you would earn a total of 87.00 from holding Japan Tobacco ADR or generate 6.61% 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. The Wendys Co
Performance |
| Timeline |
| Japan Tobacco ADR |
| The Wendys |
Japan Tobacco and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and Wendys
The main advantage of trading using opposite Japan Tobacco and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Wendys 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 Wendys will offset losses from the drop in Wendys' 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 |
| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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