Correlation Between Japan Tobacco and Bridgetown Holdings

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

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

Diversification Opportunities for Japan Tobacco and Bridgetown Holdings

-0.61

Correlation Coefficient

Japan Tobacco  Bridgetown Holdings

Excellent diversification

The 3 months correlation between Japan and Bridgetown is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Bridgetown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgetown Holdings and Japan Tobacco 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 Japan Tobacco ADR are associated (or correlated) with Bridgetown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgetown Holdings has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Bridgetown Holdings go up and down completely randomly.

Pair Corralation between Japan Tobacco and Bridgetown Holdings

If you would invest  21.00  in Bridgetown Holdings on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Bridgetown Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.79%
Values	Daily Returns

Japan Tobacco ADR  vs.  Bridgetown Holdings

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 fragile 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.

Bridgetown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgetown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bridgetown Holdings is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Japan Tobacco and Bridgetown Holdings

The main advantage of trading using opposite Japan Tobacco and Bridgetown Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Bridgetown Holdings 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 Bridgetown Holdings will offset losses from the drop in Bridgetown Holdings' long position.

The idea behind Japan Tobacco ADR and Bridgetown Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.