Correlation Between Japan Tobacco and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Choice Hotels 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 Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and Choice Hotels International, you can compare the effects of market volatilities on Japan Tobacco and Choice Hotels 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Choice Hotels.
Diversification Opportunities for Japan Tobacco and Choice Hotels
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Japan and Choice is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Choice Hotels go up and down completely randomly.
Pair Corralation between Japan Tobacco and Choice Hotels
Assuming the 90 days horizon Japan Tobacco is expected to generate 0.92 times more return on investment than Choice Hotels. However, Japan Tobacco is 1.09 times less risky than Choice Hotels. It trades about 0.04 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.03 per unit of risk. If you would invest 1,885 in Japan Tobacco on October 16, 2024 and sell it today you would earn a total of 518.00 from holding Japan Tobacco or generate 27.48% 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. Choice Hotels International
Performance |
| Timeline |
| Japan Tobacco |
| Choice Hotels Intern |
Japan Tobacco and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and Choice Hotels
The main advantage of trading using opposite Japan Tobacco and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Japan Tobacco vs. Urban Outfitters | Japan Tobacco vs. Tyson Foods | Japan Tobacco vs. AM EAGLE OUTFITTERS | Japan Tobacco vs. American Eagle Outfitters |
| Choice Hotels vs. Titan Machinery | Choice Hotels vs. Japan Tobacco | Choice Hotels vs. Sterling Construction | Choice Hotels vs. North American Construction |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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