Correlation Between TRIP GROUP and Japan Tobacco

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

By analyzing existing cross correlation between TRIPCOM GROUP DL 00125 and Japan Tobacco, you can compare the effects of market volatilities on TRIP GROUP 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 TRIP GROUP with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRIP GROUP and Japan Tobacco.

Diversification Opportunities for TRIP GROUP and Japan Tobacco

-0.1

Correlation Coefficient

TRIP GROUP  Japan Tobacco

Good diversification

The 3 months correlation between TRIP and Japan is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding TRIPCOM GROUP DL 00125 and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and TRIP GROUP 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 TRIPCOM GROUP DL 00125 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 TRIP GROUP i.e., TRIP GROUP and Japan Tobacco go up and down completely randomly.

Pair Corralation between TRIP GROUP and Japan Tobacco

Assuming the 90 days trading horizon TRIPCOM GROUP DL 00125 is expected to generate 1.89 times more return on investment than Japan Tobacco. However, TRIP GROUP is 1.89 times more volatile than Japan Tobacco. It trades about -0.01 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.14 per unit of risk. If you would invest  6,800  in TRIPCOM GROUP DL 00125 on October 22, 2024 and sell it today you would lose (110.00) from holding TRIPCOM GROUP DL 00125 or give up 1.62% of portfolio value over 90 days.

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

TRIPCOM GROUP DL 00125  vs.  Japan Tobacco

TRIPCOM GROUP DL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRIPCOM GROUP DL 00125 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TRIP GROUP 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 nearly stable basic indicators, Japan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRIP GROUP and Japan Tobacco

The main advantage of trading using opposite TRIP GROUP and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRIP GROUP 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 TRIPCOM GROUP DL 00125 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.