Correlation Between JAPAN TOBACCO and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES, you can compare the effects of market volatilities on JAPAN TOBACCO and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and NORTHEAST UTILITIES.
Diversification Opportunities for JAPAN TOBACCO and NORTHEAST UTILITIES
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between JAPAN and NORTHEAST is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and NORTHEAST UTILITIES
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 1.14 times more return on investment than NORTHEAST UTILITIES. However, JAPAN TOBACCO is 1.14 times more volatile than NORTHEAST UTILITIES. It trades about 0.05 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about -0.02 per unit of risk. If you would invest 833.00 in JAPAN TOBACCO UNSPADR12 on October 13, 2024 and sell it today you would earn a total of 327.00 from holding JAPAN TOBACCO UNSPADR12 or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| NORTHEAST UTILITIES |
JAPAN TOBACCO and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and NORTHEAST UTILITIES
The main advantage of trading using opposite JAPAN TOBACCO and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| JAPAN TOBACCO vs. FARM 51 GROUP | JAPAN TOBACCO vs. Reinsurance Group of | JAPAN TOBACCO vs. ZURICH INSURANCE GROUP | JAPAN TOBACCO vs. Singapore Reinsurance |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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