Correlation Between Japan Tobacco and PLAYMATES TOYS

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Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and PLAYMATES TOYS 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 PLAYMATES TOYS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and PLAYMATES TOYS, you can compare the effects of market volatilities on Japan Tobacco and PLAYMATES TOYS 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 PLAYMATES TOYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and PLAYMATES TOYS.

Diversification Opportunities for Japan Tobacco and PLAYMATES TOYS

JapanPLAYMATESDiversified AwayJapanPLAYMATESDiversified Away100%
0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Japan and PLAYMATES is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS 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 PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between Japan Tobacco and PLAYMATES TOYS

Assuming the 90 days horizon Japan Tobacco is expected to generate 0.39 times more return on investment than PLAYMATES TOYS. However, Japan Tobacco is 2.59 times less risky than PLAYMATES TOYS. It trades about -0.1 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about -0.05 per unit of risk. If you would invest  2,451  in Japan Tobacco on November 30, 2024 and sell it today you would lose (84.00) from holding Japan Tobacco or give up 3.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Japan Tobacco  vs.  PLAYMATES TOYS

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15JAT 45P
       Timeline  
Japan Tobacco 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Japan Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb23.52424.52525.526
PLAYMATES TOYS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.0580.060.0620.0640.0660.0680.070.0720.074

Japan Tobacco and PLAYMATES TOYS Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.35-1.78-1.21-0.64-0.07820.461.031.62.172.74 0.050.100.15
JavaScript chart by amCharts 3.21.15JAT 45P
       Returns  

Pair Trading with Japan Tobacco and PLAYMATES TOYS

The main advantage of trading using opposite Japan Tobacco and PLAYMATES TOYS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, PLAYMATES TOYS 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 PLAYMATES TOYS will offset losses from the drop in PLAYMATES TOYS's long position.
The idea behind Japan Tobacco and PLAYMATES TOYS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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