Correlation Between Japan Tobacco and Accretion Acquisition

Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Accretion Acquisition 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 Accretion Acquisition 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 Accretion Acquisition Corp, you can compare the effects of market volatilities on Japan Tobacco and Accretion Acquisition 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 Accretion Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Accretion Acquisition.

Diversification Opportunities for Japan Tobacco and Accretion Acquisition

-0.6

Correlation Coefficient

Japan Tobacco  Accretion Acquisition

Excellent diversification

The 3 months correlation between Japan and Accretion is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Accretion Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accretion Acquisition 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 Accretion Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accretion Acquisition has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Accretion Acquisition go up and down completely randomly.

Pair Corralation between Japan Tobacco and Accretion Acquisition

Assuming the 90 days horizon Japan Tobacco ADR is expected to generate 4.69 times more return on investment than Accretion Acquisition. However, Japan Tobacco is 4.69 times more volatile than Accretion Acquisition Corp. It trades about 0.06 of its potential returns per unit of risk. Accretion Acquisition Corp is currently generating about 0.12 per unit of risk. 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

Japan Tobacco ADR  vs.  Accretion Acquisition Corp

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.

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.

Pair Trading with Japan Tobacco and Accretion Acquisition

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

The idea behind Japan Tobacco ADR and Accretion Acquisition Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.