Correlation Between Japan Tobacco and Kinder Morgan
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Kinder Morgan 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 Kinder Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and Kinder Morgan, you can compare the effects of market volatilities on Japan Tobacco and Kinder Morgan 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 Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Kinder Morgan.
Diversification Opportunities for Japan Tobacco and Kinder Morgan
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Kinder is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan 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 are associated (or correlated) with Kinder Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinder Morgan has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Kinder Morgan go up and down completely randomly.
Pair Corralation between Japan Tobacco and Kinder Morgan
Assuming the 90 days horizon Japan Tobacco is expected to generate 3.51 times less return on investment than Kinder Morgan. But when comparing it to its historical volatility, Japan Tobacco is 1.5 times less risky than Kinder Morgan. It trades about 0.13 of its potential returns per unit of risk. Kinder Morgan is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,261 in Kinder Morgan on August 29, 2024 and sell it today you would earn a total of 414.00 from holding Kinder Morgan or generate 18.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco vs. Kinder Morgan
Performance |
| Timeline |
| Japan Tobacco |
| Kinder Morgan |
Japan Tobacco and Kinder Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and Kinder Morgan
The main advantage of trading using opposite Japan Tobacco and Kinder Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Kinder Morgan 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 Kinder Morgan will offset losses from the drop in Kinder Morgan's long position.| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. JAPAN TOBACCO UNSPADR12 | Japan Tobacco vs. Superior Plus Corp | Japan Tobacco vs. NMI Holdings |
| Kinder Morgan vs. ORMAT TECHNOLOGIES | Kinder Morgan vs. Wizz Air Holdings | Kinder Morgan vs. FORWARD AIR P | Kinder Morgan vs. Corsair Gaming |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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