Correlation Between XLMedia PLC and JAPAN TOBACCO

Can any of the company-specific risk be diversified away by investing in both XLMedia PLC 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 XLMedia PLC and JAPAN TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XLMedia PLC and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on XLMedia PLC 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 XLMedia PLC with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of XLMedia PLC and JAPAN TOBACCO.

Diversification Opportunities for XLMedia PLC and JAPAN TOBACCO

-0.13

Correlation Coefficient

XLMedia PLC  JAPAN TOBACCO

Good diversification

The 3 months correlation between XLMedia and JAPAN is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding XLMedia PLC 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 XLMedia PLC 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 XLMedia PLC 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 XLMedia PLC i.e., XLMedia PLC and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between XLMedia PLC and JAPAN TOBACCO

Assuming the 90 days horizon XLMedia PLC is expected to generate 3.6 times more return on investment than JAPAN TOBACCO. However, XLMedia PLC is 3.6 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.06 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.1 per unit of risk. If you would invest  9.90  in XLMedia PLC on December 30, 2024 and sell it today you would earn a total of  1.10  from holding XLMedia PLC or generate 11.11% return on investment over 90 days.

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

XLMedia PLC  vs.  JAPAN TOBACCO UNSPADR12

XLMedia PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XLMedia PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, XLMedia PLC reported solid returns over the last few months and may actually be approaching a breakup point.

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JAPAN TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XLMedia PLC and JAPAN TOBACCO

The main advantage of trading using opposite XLMedia PLC and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XLMedia PLC 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 XLMedia PLC and JAPAN TOBACCO UNSPADR12 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.