Correlation Between ITALIAN WINE and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both ITALIAN WINE and JAPAN TOBACCO 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 ITALIAN WINE and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITALIAN WINE BRANDS and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on ITALIAN WINE and JAPAN TOBACCO 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 ITALIAN WINE with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and JAPAN TOBACCO.
Diversification Opportunities for ITALIAN WINE and JAPAN TOBACCO
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between ITALIAN and JAPAN is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between ITALIAN WINE and JAPAN TOBACCO
Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 2.04 times more return on investment than JAPAN TOBACCO. However, ITALIAN WINE is 2.04 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.01 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about -0.07 per unit of risk. If you would invest 2,240 in ITALIAN WINE BRANDS on November 5, 2024 and sell it today you would lose (20.00) from holding ITALIAN WINE BRANDS or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITALIAN WINE BRANDS vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| ITALIAN WINE BRANDS |
| JAPAN TOBACCO UNSPADR12 |
ITALIAN WINE and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITALIAN WINE and JAPAN TOBACCO
The main advantage of trading using opposite ITALIAN WINE and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE position performs unexpectedly, JAPAN TOBACCO 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 JAPAN TOBACCO will offset losses from the drop in JAPAN TOBACCO's long position.| ITALIAN WINE vs. ASPEN TECHINC DL | ITALIAN WINE vs. Firan Technology Group | ITALIAN WINE vs. Playtech plc | ITALIAN WINE vs. Agilent Technologies |
| JAPAN TOBACCO vs. Grupo Carso SAB | JAPAN TOBACCO vs. CARSALESCOM | JAPAN TOBACCO vs. REVO INSURANCE SPA | JAPAN TOBACCO vs. New China Life |
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.
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