Correlation Between Clean Energy and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Clean Energy 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 Clean Energy and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clean Energy Fuels and Japan Tobacco, you can compare the effects of market volatilities on Clean Energy 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 Clean Energy with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and Japan Tobacco.
Diversification Opportunities for Clean Energy and Japan Tobacco
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Clean and Japan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Clean Energy 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 Clean Energy Fuels 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 Clean Energy i.e., Clean Energy and Japan Tobacco go up and down completely randomly.
Pair Corralation between Clean Energy and Japan Tobacco
Assuming the 90 days horizon Clean Energy Fuels is expected to generate 2.65 times more return on investment than Japan Tobacco. However, Clean Energy is 2.65 times more volatile than Japan Tobacco. It trades about 0.03 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.01 per unit of risk. If you would invest 276.00 in Clean Energy Fuels on September 1, 2024 and sell it today you would earn a total of 15.00 from holding Clean Energy Fuels or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clean Energy Fuels vs. Japan Tobacco
Performance |
| Timeline |
| Clean Energy Fuels |
| Japan Tobacco |
Clean Energy and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clean Energy and Japan Tobacco
The main advantage of trading using opposite Clean Energy and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Energy 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.| Clean Energy vs. Japan Medical Dynamic | Clean Energy vs. AVITA Medical | Clean Energy vs. Cardinal Health | Clean Energy vs. Diamyd Medical AB |
| Japan Tobacco vs. Performance Food Group | Japan Tobacco vs. JJ SNACK FOODS | Japan Tobacco vs. MUTUIONLINE | Japan Tobacco vs. LIFEWAY FOODS |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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