Correlation Between Japan Tobacco and HEIA
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and HEIA 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 HEIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and HEIA, you can compare the effects of market volatilities on Japan Tobacco and HEIA 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 HEIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and HEIA.
Diversification Opportunities for Japan Tobacco and HEIA
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Japan and HEIA is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and HEIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEIA 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 HEIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEIA has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and HEIA go up and down completely randomly.
Pair Corralation between Japan Tobacco and HEIA
Assuming the 90 days horizon Japan Tobacco is expected to generate 3.62 times less return on investment than HEIA. In addition to that, Japan Tobacco is 1.17 times more volatile than HEIA. It trades about 0.03 of its total potential returns per unit of risk. HEIA is currently generating about 0.13 per unit of volatility. If you would invest 14,706 in HEIA on September 4, 2024 and sell it today you would earn a total of 5,416 from holding HEIA or generate 36.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 77.69% |
| Values | Daily Returns |
Japan Tobacco vs. HEIA
Performance |
| Timeline |
| Japan Tobacco |
| HEIA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Japan Tobacco and HEIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and HEIA
The main advantage of trading using opposite Japan Tobacco and HEIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, HEIA 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 HEIA will offset losses from the drop in HEIA's long position.| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. JAPAN TOBACCO UNSPADR12 | Japan Tobacco vs. Imperial Brands PLC |
| HEIA vs. Japan Tobacco | HEIA vs. Aegean Airlines SA | HEIA vs. Corporate Office Properties | HEIA vs. MTI WIRELESS EDGE |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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