Correlation Between THORNEY TECHS and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both THORNEY TECHS 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 THORNEY TECHS and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THORNEY TECHS LTD and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on THORNEY TECHS 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 THORNEY TECHS with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and JAPAN TOBACCO.
Diversification Opportunities for THORNEY TECHS and JAPAN TOBACCO
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between THORNEY and JAPAN is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD 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 THORNEY TECHS 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 THORNEY TECHS LTD 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 THORNEY TECHS i.e., THORNEY TECHS and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between THORNEY TECHS and JAPAN TOBACCO
Assuming the 90 days horizon THORNEY TECHS LTD is expected to under-perform the JAPAN TOBACCO. In addition to that, THORNEY TECHS is 1.87 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.06 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.15 per unit of volatility. If you would invest 1,210 in JAPAN TOBACCO UNSPADR12 on September 1, 2024 and sell it today you would earn a total of 60.00 from holding JAPAN TOBACCO UNSPADR12 or generate 4.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
THORNEY TECHS LTD vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| THORNEY TECHS LTD |
| JAPAN TOBACCO UNSPADR12 |
THORNEY TECHS and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THORNEY TECHS and JAPAN TOBACCO
The main advantage of trading using opposite THORNEY TECHS and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THORNEY TECHS 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.| THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc | THORNEY TECHS vs. Apple Inc |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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