Correlation Between Japan Tobacco and NEXANS
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and NEXANS 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 NEXANS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and NEXANS, you can compare the effects of market volatilities on Japan Tobacco and NEXANS 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 NEXANS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and NEXANS.
Diversification Opportunities for Japan Tobacco and NEXANS
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Japan and NEXANS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and NEXANS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXANS 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 NEXANS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXANS has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and NEXANS go up and down completely randomly.
Pair Corralation between Japan Tobacco and NEXANS
Assuming the 90 days horizon Japan Tobacco is expected to generate 0.68 times more return on investment than NEXANS. However, Japan Tobacco is 1.48 times less risky than NEXANS. It trades about 0.05 of its potential returns per unit of risk. NEXANS is currently generating about 0.02 per unit of risk. If you would invest 1,733 in Japan Tobacco on December 11, 2024 and sell it today you would earn a total of 667.00 from holding Japan Tobacco or generate 38.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco vs. NEXANS
Performance |
| Timeline |
| Japan Tobacco |
| NEXANS |
Japan Tobacco and NEXANS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and NEXANS
The main advantage of trading using opposite Japan Tobacco and NEXANS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, NEXANS 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 NEXANS will offset losses from the drop in NEXANS's long position.| Japan Tobacco vs. NorAm Drilling AS | Japan Tobacco vs. ULTRA CLEAN HLDGS | Japan Tobacco vs. Fevertree Drinks PLC | Japan Tobacco vs. ALERION CLEANPOWER |
| NEXANS vs. Aedas Homes SA | NEXANS vs. Wyndham Hotels Resorts | NEXANS vs. INTERCONT HOTELS | NEXANS vs. The Hongkong and |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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