Correlation Between AdTheorent Holding and Japan Tobacco

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

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

Diversification Opportunities for AdTheorent Holding and Japan Tobacco

0.12

Correlation Coefficient

AdTheorent Holding  Japan Tobacco

Average diversification

The 3 months correlation between AdTheorent and Japan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding AdTheorent Holding and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR and AdTheorent Holding 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 AdTheorent Holding 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 ADR has no effect on the direction of AdTheorent Holding i.e., AdTheorent Holding and Japan Tobacco go up and down completely randomly.

Pair Corralation between AdTheorent Holding and Japan Tobacco

Given the investment horizon of 90 days AdTheorent Holding is expected to generate 3.59 times more return on investment than Japan Tobacco. However, AdTheorent Holding is 3.59 times more volatile than Japan Tobacco ADR. It trades about 0.07 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.05 per unit of risk. If you would invest  156.00  in AdTheorent Holding on October 5, 2024 and sell it today you would earn a total of  164.00  from holding AdTheorent Holding or generate 105.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.48%
Values	Daily Returns

AdTheorent Holding  vs.  Japan Tobacco ADR

AdTheorent Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdTheorent Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, AdTheorent Holding is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Japan Tobacco ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AdTheorent Holding and Japan Tobacco

The main advantage of trading using opposite AdTheorent Holding and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdTheorent Holding 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 AdTheorent Holding and Japan Tobacco ADR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.