Correlation Between JAPAN TOBACCO and Yanzhou Coal
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and Yanzhou Coal 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 Yanzhou Coal 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 Yanzhou Coal Mining, you can compare the effects of market volatilities on JAPAN TOBACCO and Yanzhou Coal 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 Yanzhou Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and Yanzhou Coal.
Diversification Opportunities for JAPAN TOBACCO and Yanzhou Coal
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between JAPAN and Yanzhou is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Yanzhou Coal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yanzhou Coal Mining 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 Yanzhou Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yanzhou Coal Mining has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and Yanzhou Coal go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and Yanzhou Coal
Assuming the 90 days trading horizon JAPAN TOBACCO is expected to generate 1.14 times less return on investment than Yanzhou Coal. But when comparing it to its historical volatility, JAPAN TOBACCO UNSPADR12 is 2.34 times less risky than Yanzhou Coal. It trades about 0.05 of its potential returns per unit of risk. Yanzhou Coal Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 846.00 in Yanzhou Coal Mining on December 13, 2024 and sell it today you would earn a total of 89.00 from holding Yanzhou Coal Mining or generate 10.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. Yanzhou Coal Mining
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| Yanzhou Coal Mining |
JAPAN TOBACCO and Yanzhou Coal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and Yanzhou Coal
The main advantage of trading using opposite JAPAN TOBACCO and Yanzhou Coal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, Yanzhou Coal 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 Yanzhou Coal will offset losses from the drop in Yanzhou Coal's long position.| JAPAN TOBACCO vs. DATADOT TECHNOLOGY | ||
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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