Correlation Between United States and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on United States 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 United States with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and JAPAN TOBACCO.
Diversification Opportunities for United States and JAPAN TOBACCO
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and JAPAN is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between United States and JAPAN TOBACCO
Assuming the 90 days trading horizon United States Steel is expected to generate 1.5 times more return on investment than JAPAN TOBACCO. However, United States is 1.5 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.05 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.06 per unit of risk. If you would invest 2,861 in United States Steel on August 30, 2024 and sell it today you would earn a total of 892.00 from holding United States Steel or generate 31.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. JAPAN TOBACCO UNSPADR12
Performance |
| Timeline |
| United States Steel |
| JAPAN TOBACCO UNSPADR12 |
United States and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and JAPAN TOBACCO
The main advantage of trading using opposite United States and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Steel Dynamics | United States vs. Superior Plus Corp | United States vs. SIVERS SEMICONDUCTORS AB | United States vs. Identiv |
| JAPAN TOBACCO vs. Philip Morris International | JAPAN TOBACCO vs. Philip Morris International | JAPAN TOBACCO vs. British American Tobacco | JAPAN TOBACCO vs. British American Tobacco |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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