Correlation Between JAPAN TOBACCO and Vale SA
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and Vale SA 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 Vale SA 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 Vale SA, you can compare the effects of market volatilities on JAPAN TOBACCO and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and Vale SA.
Diversification Opportunities for JAPAN TOBACCO and Vale SA
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between JAPAN and Vale is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and Vale SA go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and Vale SA
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 1.05 times more return on investment than Vale SA. However, JAPAN TOBACCO is 1.05 times more volatile than Vale SA. It trades about 0.02 of its potential returns per unit of risk. Vale SA is currently generating about -0.03 per unit of risk. If you would invest 1,256 in JAPAN TOBACCO UNSPADR12 on September 3, 2024 and sell it today you would earn a total of 24.00 from holding JAPAN TOBACCO UNSPADR12 or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. Vale SA
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| Vale SA |
JAPAN TOBACCO and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and Vale SA
The main advantage of trading using opposite JAPAN TOBACCO and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| JAPAN TOBACCO vs. Apollo Investment Corp | JAPAN TOBACCO vs. Chuangs China Investments | JAPAN TOBACCO vs. Gladstone Investment | JAPAN TOBACCO vs. REGAL ASIAN INVESTMENTS |
| Vale SA vs. Commonwealth Bank of | Vale SA vs. JAPAN TOBACCO UNSPADR12 | Vale SA vs. BRIT AMER TOBACCO | Vale SA vs. UNIVMUSIC GRPADR050 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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