Correlation Between JAPAN TOBACCO and BANK OF CHINA
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and BANK OF CHINA 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 BANK OF CHINA 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 BANK OF CHINA, you can compare the effects of market volatilities on JAPAN TOBACCO and BANK OF CHINA 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 BANK OF CHINA. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and BANK OF CHINA.
Diversification Opportunities for JAPAN TOBACCO and BANK OF CHINA
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between JAPAN and BANK is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA 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 BANK OF CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and BANK OF CHINA go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and BANK OF CHINA
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the BANK OF CHINA. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 3.41 times less risky than BANK OF CHINA. The stock trades about -0.03 of its potential returns per unit of risk. The BANK OF CHINA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 33.00 in BANK OF CHINA on November 8, 2024 and sell it today you would earn a total of 17.00 from holding BANK OF CHINA or generate 51.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. BANK OF CHINA
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| BANK OF CHINA |
JAPAN TOBACCO and BANK OF CHINA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and BANK OF CHINA
The main advantage of trading using opposite JAPAN TOBACCO and BANK OF CHINA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, BANK OF CHINA 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 BANK OF CHINA will offset losses from the drop in BANK OF CHINA's long position.| JAPAN TOBACCO vs. US Physical Therapy | JAPAN TOBACCO vs. OPKO HEALTH | JAPAN TOBACCO vs. Phibro Animal Health | JAPAN TOBACCO vs. Renesas Electronics |
| BANK OF CHINA vs. Diamyd Medical AB | BANK OF CHINA vs. Apollo Medical Holdings | BANK OF CHINA vs. FORTRESS BIOTECHPRFA 25 | BANK OF CHINA vs. CompuGroup Medical 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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