Correlation Between JAPAN TOBACCO and Occidental Petroleum
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and Occidental Petroleum 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 Occidental Petroleum 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 Occidental Petroleum, you can compare the effects of market volatilities on JAPAN TOBACCO and Occidental Petroleum 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 Occidental Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and Occidental Petroleum.
Diversification Opportunities for JAPAN TOBACCO and Occidental Petroleum
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between JAPAN and Occidental is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and Occidental Petroleum go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and Occidental Petroleum
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the Occidental Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 1.37 times less risky than Occidental Petroleum. The stock trades about -0.2 of its potential returns per unit of risk. The Occidental Petroleum is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 4,837 in Occidental Petroleum on October 26, 2024 and sell it today you would lose (13.00) from holding Occidental Petroleum or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. Occidental Petroleum
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| Occidental Petroleum |
JAPAN TOBACCO and Occidental Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and Occidental Petroleum
The main advantage of trading using opposite JAPAN TOBACCO and Occidental Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, Occidental Petroleum 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 Occidental Petroleum will offset losses from the drop in Occidental Petroleum's long position.| JAPAN TOBACCO vs. National Health Investors | JAPAN TOBACCO vs. Siemens Healthineers AG | JAPAN TOBACCO vs. ITALIAN WINE BRANDS | JAPAN TOBACCO vs. Universal Health Realty |
| Occidental Petroleum vs. FORWARD AIR P | Occidental Petroleum vs. JAPAN TOBACCO UNSPADR12 | Occidental Petroleum vs. Japan Tobacco | Occidental Petroleum vs. British American Tobacco |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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