Correlation Between Japan Tobacco and H2O Retailing
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and H2O Retailing 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 H2O Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and H2O Retailing, you can compare the effects of market volatilities on Japan Tobacco and H2O Retailing 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 H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and H2O Retailing.
Diversification Opportunities for Japan Tobacco and H2O Retailing
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Japan and H2O is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing 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 H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and H2O Retailing go up and down completely randomly.
Pair Corralation between Japan Tobacco and H2O Retailing
Assuming the 90 days horizon Japan Tobacco is expected to generate 2.78 times less return on investment than H2O Retailing. But when comparing it to its historical volatility, Japan Tobacco is 1.79 times less risky than H2O Retailing. It trades about 0.04 of its potential returns per unit of risk. H2O Retailing is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 649.00 in H2O Retailing on October 11, 2024 and sell it today you would earn a total of 701.00 from holding H2O Retailing or generate 108.01% 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. H2O Retailing
Performance |
| Timeline |
| Japan Tobacco |
| H2O Retailing |
Japan Tobacco and H2O Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and H2O Retailing
The main advantage of trading using opposite Japan Tobacco and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.| Japan Tobacco vs. Cal Maine Foods | Japan Tobacco vs. CANON MARKETING JP | Japan Tobacco vs. TRADEGATE | Japan Tobacco vs. EBRO FOODS |
| H2O Retailing vs. Charter Communications | H2O Retailing vs. China BlueChemical | H2O Retailing vs. TELECOM ITALIA | H2O Retailing vs. Telecom Argentina 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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