Correlation Between G-III Apparel and Japan Tobacco

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

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

Diversification Opportunities for G-III Apparel and Japan Tobacco

-0.14

Correlation Coefficient

G-III Apparel  Japan Tobacco

Good diversification

The 3 months correlation between G-III and Japan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and G-III Apparel 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 G III Apparel Group 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 G-III Apparel i.e., G-III Apparel and Japan Tobacco go up and down completely randomly.

Pair Corralation between G-III Apparel and Japan Tobacco

Assuming the 90 days trading horizon G III Apparel Group is expected to generate 2.56 times more return on investment than Japan Tobacco. However, G-III Apparel is 2.56 times more volatile than Japan Tobacco. It trades about 0.1 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.41 per unit of risk. If you would invest  2,980  in G III Apparel Group on October 10, 2024 and sell it today you would earn a total of  140.00  from holding G III Apparel Group or generate 4.7% return on investment over 90 days.

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

G III Apparel Group  vs.  Japan Tobacco

G III Apparel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in G III Apparel Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, G-III Apparel unveiled 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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with G-III Apparel and Japan Tobacco

The main advantage of trading using opposite G-III Apparel and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III Apparel 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 G III Apparel Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.