Correlation Between Japan Tobacco and GEAR4MUSIC
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and GEAR4MUSIC 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 GEAR4MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and GEAR4MUSIC LS 10, you can compare the effects of market volatilities on Japan Tobacco and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and GEAR4MUSIC.
Diversification Opportunities for Japan Tobacco and GEAR4MUSIC
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Japan and GEAR4MUSIC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and GEAR4MUSIC go up and down completely randomly.
Pair Corralation between Japan Tobacco and GEAR4MUSIC
Assuming the 90 days horizon Japan Tobacco is expected to generate 1.83 times less return on investment than GEAR4MUSIC. But when comparing it to its historical volatility, Japan Tobacco is 2.27 times less risky than GEAR4MUSIC. It trades about 0.06 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 121.00 in GEAR4MUSIC LS 10 on August 29, 2024 and sell it today you would earn a total of 63.00 from holding GEAR4MUSIC LS 10 or generate 52.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco vs. GEAR4MUSIC LS 10
Performance |
| Timeline |
| Japan Tobacco |
| GEAR4MUSIC LS 10 |
Japan Tobacco and GEAR4MUSIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and GEAR4MUSIC
The main advantage of trading using opposite Japan Tobacco and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC'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 |
| GEAR4MUSIC vs. Amazon Inc | GEAR4MUSIC vs. Amazon Inc | GEAR4MUSIC vs. Alibaba Group Holdings | GEAR4MUSIC vs. JD Inc Adr |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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