Correlation Between JAPAN TOBACCO and LIFENET INSURANCE
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and LIFENET INSURANCE 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 LIFENET INSURANCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and LIFENET INSURANCE CO, you can compare the effects of market volatilities on JAPAN TOBACCO and LIFENET INSURANCE 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 LIFENET INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and LIFENET INSURANCE.
Diversification Opportunities for JAPAN TOBACCO and LIFENET INSURANCE
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between JAPAN and LIFENET is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and LIFENET INSURANCE CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LIFENET INSURANCE 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 UNSPADR12 are associated (or correlated) with LIFENET INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LIFENET INSURANCE has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and LIFENET INSURANCE go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and LIFENET INSURANCE
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.39 times more return on investment than LIFENET INSURANCE. However, JAPAN TOBACCO UNSPADR12 is 2.54 times less risky than LIFENET INSURANCE. It trades about -0.19 of its potential returns per unit of risk. LIFENET INSURANCE CO is currently generating about -0.09 per unit of risk. If you would invest 1,260 in JAPAN TOBACCO UNSPADR12 on September 25, 2024 and sell it today you would lose (40.00) from holding JAPAN TOBACCO UNSPADR12 or give up 3.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. LIFENET INSURANCE CO
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| LIFENET INSURANCE |
JAPAN TOBACCO and LIFENET INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and LIFENET INSURANCE
The main advantage of trading using opposite JAPAN TOBACCO and LIFENET INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, LIFENET INSURANCE 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 LIFENET INSURANCE will offset losses from the drop in LIFENET INSURANCE's long position.| JAPAN TOBACCO vs. Philip Morris International | JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. British American Tobacco |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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