Correlation Between Japan Tobacco and GFL ENVIRONM
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and GFL ENVIRONM 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 GFL ENVIRONM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and GFL ENVIRONM, you can compare the effects of market volatilities on Japan Tobacco and GFL ENVIRONM 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 GFL ENVIRONM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and GFL ENVIRONM.
Diversification Opportunities for Japan Tobacco and GFL ENVIRONM
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and GFL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and GFL ENVIRONM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFL ENVIRONM 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 GFL ENVIRONM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFL ENVIRONM has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and GFL ENVIRONM go up and down completely randomly.
Pair Corralation between Japan Tobacco and GFL ENVIRONM
Assuming the 90 days horizon Japan Tobacco is expected to generate 7.76 times less return on investment than GFL ENVIRONM. But when comparing it to its historical volatility, Japan Tobacco is 1.36 times less risky than GFL ENVIRONM. It trades about 0.05 of its potential returns per unit of risk. GFL ENVIRONM is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,860 in GFL ENVIRONM on August 25, 2024 and sell it today you would earn a total of 480.00 from holding GFL ENVIRONM or generate 12.44% 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 vs. GFL ENVIRONM
Performance |
| Timeline |
| Japan Tobacco |
| GFL ENVIRONM |
Japan Tobacco and GFL ENVIRONM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and GFL ENVIRONM
The main advantage of trading using opposite Japan Tobacco and GFL ENVIRONM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, GFL ENVIRONM 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 GFL ENVIRONM will offset losses from the drop in GFL ENVIRONM's long position.| Japan Tobacco vs. Philip Morris International | Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. British American Tobacco |
| GFL ENVIRONM vs. HEALTHCARE REAL A | GFL ENVIRONM vs. Transportadora de Gas | GFL ENVIRONM vs. Texas Roadhouse | GFL ENVIRONM vs. ATRYS HEALTH SA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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