Correlation Between Grayscale Decentralized and Japan Tobacco

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

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

Diversification Opportunities for Grayscale Decentralized and Japan Tobacco

0.15

Correlation Coefficient

Grayscale Decentralized  Japan Tobacco

Average diversification

The 3 months correlation between Grayscale and Japan is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Decentralized Financ 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 Grayscale Decentralized 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 Grayscale Decentralized Finance 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 Grayscale Decentralized i.e., Grayscale Decentralized and Japan Tobacco go up and down completely randomly.

Pair Corralation between Grayscale Decentralized and Japan Tobacco

Given the investment horizon of 90 days Grayscale Decentralized Finance is expected to under-perform the Japan Tobacco. In addition to that, Grayscale Decentralized is 9.48 times more volatile than Japan Tobacco ADR. It trades about -0.07 of its total potential returns per unit of risk. Japan Tobacco ADR is currently generating about -0.45 per unit of volatility. If you would invest  1,359  in Japan Tobacco ADR on October 14, 2024 and sell it today you would lose (124.00) from holding Japan Tobacco ADR or give up 9.12% of portfolio value over 90 days.

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

Grayscale Decentralized Financ  vs.  Japan Tobacco ADR

Grayscale Decentralized

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Decentralized Finance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Grayscale Decentralized reported solid returns over the last few months and may actually be approaching a breakup point.

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 Grayscale Decentralized and Japan Tobacco

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

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.