Correlation Between Japan Tobacco and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and AB Volvo 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 AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Tobacco and AB Volvo, you can compare the effects of market volatilities on Japan Tobacco and AB Volvo 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 AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and AB Volvo.
Diversification Opportunities for Japan Tobacco and AB Volvo
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Japan and VOL3 is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and AB Volvo go up and down completely randomly.
Pair Corralation between Japan Tobacco and AB Volvo
Assuming the 90 days horizon Japan Tobacco is expected to generate 1.91 times less return on investment than AB Volvo. In addition to that, Japan Tobacco is 1.0 times more volatile than AB Volvo. It trades about 0.06 of its total potential returns per unit of risk. AB Volvo is currently generating about 0.11 per unit of volatility. If you would invest 2,204 in AB Volvo on November 3, 2024 and sell it today you would earn a total of 482.00 from holding AB Volvo or generate 21.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Tobacco vs. AB Volvo
Performance |
| Timeline |
| Japan Tobacco |
| AB Volvo |
Japan Tobacco and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Tobacco and AB Volvo
The main advantage of trading using opposite Japan Tobacco and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo's long position.| Japan Tobacco vs. Tencent Music Entertainment | Japan Tobacco vs. Coffee Holding Co | Japan Tobacco vs. Fuji Media Holdings | Japan Tobacco vs. alstria office REIT AG |
| AB Volvo vs. Zijin Mining Group | AB Volvo vs. American Airlines Group | AB Volvo vs. International Consolidated Airlines | AB Volvo vs. GRIFFIN MINING LTD |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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