Correlation Between Japan Tobacco and ScanSource
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and ScanSource 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 ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and ScanSource, you can compare the effects of market volatilities on Japan Tobacco and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and ScanSource.
Diversification Opportunities for Japan Tobacco and ScanSource
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Japan and ScanSource is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and ScanSource go up and down completely randomly.
Pair Corralation between Japan Tobacco and ScanSource
Assuming the 90 days horizon Japan Tobacco is expected to generate 8.23 times less return on investment than ScanSource. But when comparing it to its historical volatility, Japan Tobacco is 1.68 times less risky than ScanSource. It trades about 0.04 of its potential returns per unit of risk. ScanSource is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 4,620 in ScanSource on September 20, 2024 and sell it today you would earn a total of 360.00 from holding ScanSource or generate 7.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco vs. ScanSource
Performance |
| Timeline |
| Japan Tobacco |
| ScanSource |
Japan Tobacco and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and ScanSource
The main advantage of trading using opposite Japan Tobacco and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.| Japan Tobacco vs. Pembina Pipeline Corp | Japan Tobacco vs. Air Transport Services | Japan Tobacco vs. Fukuyama Transporting Co | Japan Tobacco vs. JD SPORTS FASH |
| ScanSource vs. Fukuyama Transporting Co | ScanSource vs. Gold Road Resources | ScanSource vs. TEXAS ROADHOUSE | ScanSource vs. Broadridge Financial Solutions |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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