Correlation Between Japan Tobacco and GAMESTOP
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and GAMESTOP 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 GAMESTOP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and GAMESTOP, you can compare the effects of market volatilities on Japan Tobacco and GAMESTOP 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 GAMESTOP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and GAMESTOP.
Diversification Opportunities for Japan Tobacco and GAMESTOP
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Japan and GAMESTOP is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP 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 GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and GAMESTOP go up and down completely randomly.
Pair Corralation between Japan Tobacco and GAMESTOP
Assuming the 90 days horizon Japan Tobacco is expected to generate 0.4 times more return on investment than GAMESTOP. However, Japan Tobacco is 2.53 times less risky than GAMESTOP. It trades about 0.15 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.01 per unit of risk. If you would invest 2,536 in Japan Tobacco on September 12, 2024 and sell it today you would earn a total of 114.00 from holding Japan Tobacco or generate 4.5% 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. GAMESTOP
Performance |
| Timeline |
| Japan Tobacco |
| GAMESTOP |
Japan Tobacco and GAMESTOP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and GAMESTOP
The main advantage of trading using opposite Japan Tobacco and GAMESTOP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, GAMESTOP 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 GAMESTOP will offset losses from the drop in GAMESTOP's long position.| Japan Tobacco vs. TEXAS ROADHOUSE | Japan Tobacco vs. COPLAND ROAD CAPITAL | Japan Tobacco vs. QUEEN S ROAD | Japan Tobacco vs. Kaufman Broad 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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