Correlation Between Japan Tobacco and Plastic Omnium
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Plastic Omnium 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 Plastic Omnium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and Plastic Omnium, you can compare the effects of market volatilities on Japan Tobacco and Plastic Omnium 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 Plastic Omnium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Plastic Omnium.
Diversification Opportunities for Japan Tobacco and Plastic Omnium
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and Plastic is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic Omnium 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 Plastic Omnium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic Omnium has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Plastic Omnium go up and down completely randomly.
Pair Corralation between Japan Tobacco and Plastic Omnium
Assuming the 90 days horizon Japan Tobacco is expected to generate 0.68 times more return on investment than Plastic Omnium. However, Japan Tobacco is 1.47 times less risky than Plastic Omnium. It trades about 0.05 of its potential returns per unit of risk. Plastic Omnium is currently generating about -0.02 per unit of risk. If you would invest 1,926 in Japan Tobacco on September 3, 2024 and sell it today you would earn a total of 710.00 from holding Japan Tobacco or generate 36.86% 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. Plastic Omnium
Performance |
| Timeline |
| Japan Tobacco |
| Plastic Omnium |
Japan Tobacco and Plastic Omnium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and Plastic Omnium
The main advantage of trading using opposite Japan Tobacco and Plastic Omnium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Plastic Omnium 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 Plastic Omnium will offset losses from the drop in Plastic Omnium's long position.| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. JAPAN TOBACCO UNSPADR12 | Japan Tobacco vs. Imperial Brands PLC |
| Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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