Correlation Between BANK OF CHINA and JAPAN TOBACCO
Can any of the company-specific risk be diversified away by investing in both BANK OF CHINA 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 BANK OF CHINA and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BANK OF CHINA and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on BANK OF CHINA 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 BANK OF CHINA with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of BANK OF CHINA and JAPAN TOBACCO.
Diversification Opportunities for BANK OF CHINA and JAPAN TOBACCO
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BANK and JAPAN is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding BANK OF CHINA 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 BANK OF CHINA 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 BANK OF CHINA 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 BANK OF CHINA i.e., BANK OF CHINA and JAPAN TOBACCO go up and down completely randomly.
Pair Corralation between BANK OF CHINA and JAPAN TOBACCO
Assuming the 90 days trading horizon BANK OF CHINA is expected to generate 5.97 times more return on investment than JAPAN TOBACCO. However, BANK OF CHINA is 5.97 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.27 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.07 per unit of risk. If you would invest 35.00 in BANK OF CHINA on November 1, 2024 and sell it today you would earn a total of 16.00 from holding BANK OF CHINA or generate 45.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.24% |
Values | Daily Returns |
BANK OF CHINA vs. JAPAN TOBACCO UNSPADR12
Performance |
Timeline |
BANK OF CHINA |
JAPAN TOBACCO UNSPADR12 |
BANK OF CHINA and JAPAN TOBACCO Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BANK OF CHINA and JAPAN TOBACCO
The main advantage of trading using opposite BANK OF CHINA and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK OF CHINA 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.BANK OF CHINA vs. Apple Inc | BANK OF CHINA vs. Apple Inc | BANK OF CHINA vs. Apple Inc | BANK OF CHINA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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