Correlation Between Broadstone Net and Japan Tobacco

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Can any of the company-specific risk be diversified away by investing in both Broadstone Net 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 Broadstone Net and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadstone Net Lease and Japan Tobacco ADR, you can compare the effects of market volatilities on Broadstone Net 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 Broadstone Net with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadstone Net and Japan Tobacco.

Diversification Opportunities for Broadstone Net and Japan Tobacco

BroadstoneJapanDiversified AwayBroadstoneJapanDiversified Away100%
0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Broadstone and Japan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Broadstone Net Lease 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 Broadstone Net 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 Broadstone Net Lease 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 Broadstone Net i.e., Broadstone Net and Japan Tobacco go up and down completely randomly.

Pair Corralation between Broadstone Net and Japan Tobacco

Considering the 90-day investment horizon Broadstone Net Lease is expected to generate 0.91 times more return on investment than Japan Tobacco. However, Broadstone Net Lease is 1.1 times less risky than Japan Tobacco. It trades about -0.27 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about -0.32 per unit of risk. If you would invest  1,658  in Broadstone Net Lease on October 12, 2024 and sell it today you would lose (102.00) from holding Broadstone Net Lease or give up 6.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Broadstone Net Lease  vs.  Japan Tobacco ADR

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-50
JavaScript chart by amCharts 3.21.15BNL JAPAY
       Timeline  
Broadstone Net Lease 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Broadstone Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1515.51616.51717.51818.5
Japan Tobacco ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan12.51313.51414.5

Broadstone Net and Japan Tobacco Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.79-1.38-0.97-0.56-0.150.140.550.961.371.78 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15BNL JAPAY
       Returns  

Pair Trading with Broadstone Net and Japan Tobacco

The main advantage of trading using opposite Broadstone Net and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadstone Net 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 Broadstone Net Lease 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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