Correlation Between JAPAN TOBACCO and AB Volvo
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and AB Volvo 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 AB Volvo 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 AB Volvo, you can compare the effects of market volatilities on JAPAN TOBACCO and AB Volvo 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 AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and AB Volvo.
Diversification Opportunities for JAPAN TOBACCO and AB Volvo
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between JAPAN and VOL1 is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and AB Volvo go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and AB Volvo
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 1.08 times more return on investment than AB Volvo. However, JAPAN TOBACCO is 1.08 times more volatile than AB Volvo. It trades about 0.16 of its potential returns per unit of risk. AB Volvo is currently generating about 0.13 per unit of risk. If you would invest 1,200 in JAPAN TOBACCO UNSPADR12 on September 14, 2024 and sell it today you would earn a total of 60.00 from holding JAPAN TOBACCO UNSPADR12 or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. AB Volvo
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| AB Volvo |
JAPAN TOBACCO and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and AB Volvo
The main advantage of trading using opposite JAPAN TOBACCO and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo's long position.| JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. Japan Tobacco |
| AB Volvo vs. Magnachip Semiconductor | AB Volvo vs. Methode Electronics | AB Volvo vs. JAPAN TOBACCO UNSPADR12 | AB Volvo vs. Schweizer Electronic AG |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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