Correlation Between Encounter Technologi and Japan Tobacco

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

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

Diversification Opportunities for Encounter Technologi and Japan Tobacco

0.0

Correlation Coefficient

Encounter Technologi  Japan Tobacco

Pay attention - limited upside

The 3 months correlation between Encounter and Japan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Encounter Technologi 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 Encounter Technologi 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 Encounter Technologi 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 Encounter Technologi i.e., Encounter Technologi and Japan Tobacco go up and down completely randomly.

Pair Corralation between Encounter Technologi and Japan Tobacco

If you would invest  0.00  in Encounter Technologi on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Encounter Technologi or generate 0.0% return on investment over 90 days.

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

Encounter Technologi  vs.  Japan Tobacco ADR

Encounter Technologi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Encounter Technologi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Encounter Technologi is not utilizing all of its potentials. The recent 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 weak 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 Encounter Technologi and Japan Tobacco

The main advantage of trading using opposite Encounter Technologi and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Encounter Technologi 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 Encounter Technologi 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.