Correlation Between JAPAN TOBACCO and AVIS BUDGET
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and AVIS BUDGET 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 AVIS BUDGET 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 AVIS BUDGET GROUP, you can compare the effects of market volatilities on JAPAN TOBACCO and AVIS BUDGET 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 AVIS BUDGET. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and AVIS BUDGET.
Diversification Opportunities for JAPAN TOBACCO and AVIS BUDGET
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between JAPAN and AVIS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and AVIS BUDGET GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVIS BUDGET GROUP 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 AVIS BUDGET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVIS BUDGET GROUP has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and AVIS BUDGET go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and AVIS BUDGET
Assuming the 90 days trading horizon JAPAN TOBACCO is expected to generate 3.38 times less return on investment than AVIS BUDGET. But when comparing it to its historical volatility, JAPAN TOBACCO UNSPADR12 is 2.2 times less risky than AVIS BUDGET. It trades about 0.08 of its potential returns per unit of risk. AVIS BUDGET GROUP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 8,754 in AVIS BUDGET GROUP on September 12, 2024 and sell it today you would earn a total of 738.00 from holding AVIS BUDGET GROUP or generate 8.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. AVIS BUDGET GROUP
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| AVIS BUDGET GROUP |
JAPAN TOBACCO and AVIS BUDGET Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and AVIS BUDGET
The main advantage of trading using opposite JAPAN TOBACCO and AVIS BUDGET positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, AVIS BUDGET 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 AVIS BUDGET will offset losses from the drop in AVIS BUDGET's long position.| JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. Japan Tobacco |
| AVIS BUDGET vs. JAPAN TOBACCO UNSPADR12 | AVIS BUDGET vs. JIAHUA STORES | AVIS BUDGET vs. BURLINGTON STORES | AVIS BUDGET vs. IDP EDUCATION 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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