Correlation Between JAPAN TOBACCO and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and INDOFOOD AGRI 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 INDOFOOD AGRI 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 INDOFOOD AGRI RES, you can compare the effects of market volatilities on JAPAN TOBACCO and INDOFOOD AGRI 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 INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and INDOFOOD AGRI.
Diversification Opportunities for JAPAN TOBACCO and INDOFOOD AGRI
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between JAPAN and INDOFOOD is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES 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 INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between JAPAN TOBACCO and INDOFOOD AGRI
Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the INDOFOOD AGRI. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 1.31 times less risky than INDOFOOD AGRI. The stock trades about -0.1 of its potential returns per unit of risk. The INDOFOOD AGRI RES is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 21.00 in INDOFOOD AGRI RES on October 14, 2024 and sell it today you would earn a total of 1.00 from holding INDOFOOD AGRI RES or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN TOBACCO UNSPADR12 vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| JAPAN TOBACCO UNSPADR12 |
| INDOFOOD AGRI RES |
JAPAN TOBACCO and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN TOBACCO and INDOFOOD AGRI
The main advantage of trading using opposite JAPAN TOBACCO and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO position performs unexpectedly, INDOFOOD AGRI 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 INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.| JAPAN TOBACCO vs. Luckin Coffee | JAPAN TOBACCO vs. BE Semiconductor Industries | JAPAN TOBACCO vs. Siamgas And Petrochemicals | JAPAN TOBACCO vs. COFCO Joycome Foods |
| INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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