Correlation Between Westlake Chemical and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical 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 Westlake Chemical and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and Japan Tobacco, you can compare the effects of market volatilities on Westlake Chemical 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 Westlake Chemical with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and Japan Tobacco.
Diversification Opportunities for Westlake Chemical and Japan Tobacco
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Westlake and Japan is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical i.e., Westlake Chemical and Japan Tobacco go up and down completely randomly.
Pair Corralation between Westlake Chemical and Japan Tobacco
Assuming the 90 days horizon Westlake Chemical is expected to generate 1.3 times less return on investment than Japan Tobacco. In addition to that, Westlake Chemical is 1.05 times more volatile than Japan Tobacco. It trades about 0.03 of its total potential returns per unit of risk. Japan Tobacco is currently generating about 0.04 per unit of volatility. If you would invest 1,930 in Japan Tobacco on August 29, 2024 and sell it today you would earn a total of 690.00 from holding Japan Tobacco or generate 35.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westlake Chemical vs. Japan Tobacco
Performance |
| Timeline |
| Westlake Chemical |
| Japan Tobacco |
Westlake Chemical and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and Japan Tobacco
The main advantage of trading using opposite Westlake Chemical and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical 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.| Westlake Chemical vs. Warner Music Group | Westlake Chemical vs. Soken Chemical Engineering | Westlake Chemical vs. GEAR4MUSIC LS 10 | Westlake Chemical vs. Silicon Motion Technology |
| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. JAPAN TOBACCO UNSPADR12 | Japan Tobacco vs. Superior Plus Corp | Japan Tobacco vs. NMI Holdings |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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