Correlation Between United Utilities and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 Utilities 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 Utilities Group and Japan Tobacco, you can compare the effects of market volatilities on United Utilities 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 Utilities with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Japan Tobacco.
Diversification Opportunities for United Utilities and Japan Tobacco
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Japan is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and United Utilities 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 Utilities Group 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 United Utilities i.e., United Utilities and Japan Tobacco go up and down completely randomly.
Pair Corralation between United Utilities and Japan Tobacco
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Japan Tobacco. In addition to that, United Utilities is 1.38 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 -0.03 per unit of volatility. If you would invest 2,527 in Japan Tobacco on November 6, 2024 and sell it today you would lose (72.00) from holding Japan Tobacco or give up 2.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.31% |
| Values | Daily Returns |
United Utilities Group vs. Japan Tobacco
Performance |
| Timeline |
| United Utilities |
| Japan Tobacco |
United Utilities and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Japan Tobacco
The main advantage of trading using opposite United Utilities and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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 Utilities vs. Salesforce | United Utilities vs. ZhongAn Online P | United Utilities vs. New Residential Investment | United Utilities vs. Odyssean Investment Trust |
| Japan Tobacco vs. UPDATE SOFTWARE | Japan Tobacco vs. ECHO INVESTMENT ZY | Japan Tobacco vs. HK Electric Investments | Japan Tobacco vs. PKSHA TECHNOLOGY INC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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