Correlation Between JAPAN TOBACCO and North American
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on JAPAN TOBACCO and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and North American.
Diversification Opportunities for JAPAN TOBACCO and North American
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JAPAN and North is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and North American go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and North American
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.46 times more return on investment than North American. However, JAPAN TOBACCO UNSPADR12 is 2.18 times less risky than North American. It trades about -0.07 of its potential returns per unit of risk. North American Construction is currently generating about -0.21 per unit of risk. If you would invest 1,200 in JAPAN TOBACCO UNSPADR12 on November 5, 2024 and sell it today you would lose (20.00) from holding JAPAN TOBACCO UNSPADR12 or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. North American Construction
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| North American Const |
JAPAN TOBACCO and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and North American
The main advantage of trading using opposite JAPAN TOBACCO and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| JAPAN TOBACCO vs. Grupo Carso SAB | JAPAN TOBACCO vs. CARSALESCOM | JAPAN TOBACCO vs. REVO INSURANCE SPA | JAPAN TOBACCO vs. New China Life |
| North American vs. ARDAGH METAL PACDL 0001 | North American vs. East Africa Metals | North American vs. MCEWEN MINING INC | North American vs. Ringmetall SE |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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