Correlation Between Accretion Acquisition and Japan Tobacco

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

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

Diversification Opportunities for Accretion Acquisition and Japan Tobacco

-0.6

Correlation Coefficient

Accretion Acquisition  Japan Tobacco

Excellent diversification

The 3 months correlation between Accretion and Japan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Accretion Acquisition Corp 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 Accretion Acquisition 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 Accretion Acquisition Corp 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 Accretion Acquisition i.e., Accretion Acquisition and Japan Tobacco go up and down completely randomly.

Pair Corralation between Accretion Acquisition and Japan Tobacco

Assuming the 90 days horizon Accretion Acquisition is expected to generate 2.12 times less return on investment than Japan Tobacco. But when comparing it to its historical volatility, Accretion Acquisition Corp is 4.69 times less risky than Japan Tobacco. It trades about 0.12 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,009  in Japan Tobacco ADR on September 21, 2024 and sell it today you would earn a total of  328.00  from holding Japan Tobacco ADR or generate 32.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	27.68%
Values	Daily Returns

Accretion Acquisition Corp  vs.  Japan Tobacco ADR

Accretion Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Accretion Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Accretion Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Accretion Acquisition and Japan Tobacco

The main advantage of trading using opposite Accretion Acquisition and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Accretion Acquisition 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 Accretion Acquisition Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.