Correlation Between MEDICAL FACILITIES and Japan Tobacco

Can any of the company-specific risk be diversified away by investing in both MEDICAL FACILITIES 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 MEDICAL FACILITIES and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MEDICAL FACILITIES NEW and Japan Tobacco, you can compare the effects of market volatilities on MEDICAL FACILITIES 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 MEDICAL FACILITIES with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of MEDICAL FACILITIES and Japan Tobacco.

Diversification Opportunities for MEDICAL FACILITIES and Japan Tobacco

-0.04

Correlation Coefficient

MEDICAL FACILITIES  Japan Tobacco

Good diversification

The 3 months correlation between MEDICAL and Japan is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding MEDICAL FACILITIES NEW and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and MEDICAL FACILITIES 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 MEDICAL FACILITIES NEW 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 MEDICAL FACILITIES i.e., MEDICAL FACILITIES and Japan Tobacco go up and down completely randomly.

Pair Corralation between MEDICAL FACILITIES and Japan Tobacco

Assuming the 90 days horizon MEDICAL FACILITIES NEW is expected to generate 2.16 times more return on investment than Japan Tobacco. However, MEDICAL FACILITIES is 2.16 times more volatile than Japan Tobacco. It trades about -0.25 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.58 per unit of risk. If you would invest  1,100  in MEDICAL FACILITIES NEW on October 5, 2024 and sell it today you would lose (80.00) from holding MEDICAL FACILITIES NEW or give up 7.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MEDICAL FACILITIES NEW  vs.  Japan Tobacco

MEDICAL FACILITIES NEW

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days MEDICAL FACILITIES NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, MEDICAL FACILITIES reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MEDICAL FACILITIES and Japan Tobacco

The main advantage of trading using opposite MEDICAL FACILITIES and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MEDICAL FACILITIES 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.

The idea behind MEDICAL FACILITIES NEW and Japan Tobacco pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.