Correlation Between JAPAN TOBACCO and VOLVO B
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and VOLVO B 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 VOLVO B 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 VOLVO B UNSPADR, you can compare the effects of market volatilities on JAPAN TOBACCO and VOLVO B 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 VOLVO B. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and VOLVO B.
Diversification Opportunities for JAPAN TOBACCO and VOLVO B
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between JAPAN and VOLVO is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and VOLVO B UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLVO B UNSPADR 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 VOLVO B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLVO B UNSPADR has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and VOLVO B go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and VOLVO B
Assuming the 90 days trading horizon JAPAN TOBACCO is expected to generate 1.09 times less return on investment than VOLVO B. But when comparing it to its historical volatility, JAPAN TOBACCO UNSPADR12 is 1.04 times less risky than VOLVO B. It trades about 0.06 of its potential returns per unit of risk. VOLVO B UNSPADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,523 in VOLVO B UNSPADR on August 28, 2024 and sell it today you would earn a total of 817.00 from holding VOLVO B UNSPADR or generate 53.64% 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. VOLVO B UNSPADR
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| VOLVO B UNSPADR |
JAPAN TOBACCO and VOLVO B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and VOLVO B
The main advantage of trading using opposite JAPAN TOBACCO and VOLVO B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, VOLVO B 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 VOLVO B will offset losses from the drop in VOLVO B's long position.| JAPAN TOBACCO vs. Burlington Stores | JAPAN TOBACCO vs. SWISS WATER DECAFFCOFFEE | JAPAN TOBACCO vs. FAST RETAIL ADR | JAPAN TOBACCO vs. Darden Restaurants |
| VOLVO B vs. Fukuyama Transporting Co | VOLVO B vs. Scandinavian Tobacco Group | VOLVO B vs. JAPAN TOBACCO UNSPADR12 | VOLVO B vs. Tradeweb Markets |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |