Correlation Between Tsingtao Brewery and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Tsingtao Brewery 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 Tsingtao Brewery and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tsingtao Brewery and Japan Tobacco, you can compare the effects of market volatilities on Tsingtao Brewery 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 Tsingtao Brewery with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tsingtao Brewery and Japan Tobacco.
Diversification Opportunities for Tsingtao Brewery and Japan Tobacco
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Tsingtao and Japan is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Tsingtao Brewery 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 Tsingtao Brewery 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 has no effect on the direction of Tsingtao Brewery i.e., Tsingtao Brewery and Japan Tobacco go up and down completely randomly.
Pair Corralation between Tsingtao Brewery and Japan Tobacco
Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 2.11 times more return on investment than Japan Tobacco. However, Tsingtao Brewery is 2.11 times more volatile than Japan Tobacco. It trades about 0.03 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.05 per unit of risk. If you would invest 484.00 in Tsingtao Brewery on September 3, 2024 and sell it today you would earn a total of 117.00 from holding Tsingtao Brewery or generate 24.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tsingtao Brewery vs. Japan Tobacco
Performance |
| Timeline |
| Tsingtao Brewery |
| Japan Tobacco |
Tsingtao Brewery and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tsingtao Brewery and Japan Tobacco
The main advantage of trading using opposite Tsingtao Brewery and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsingtao Brewery 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.| Tsingtao Brewery vs. Siamgas And Petrochemicals | Tsingtao Brewery vs. MELIA HOTELS | Tsingtao Brewery vs. JAPAN AIRLINES | Tsingtao Brewery vs. MIRAMAR HOTEL INV |
| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. JAPAN TOBACCO UNSPADR12 | Japan Tobacco vs. Imperial Brands PLC |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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