Correlation Between Japan Tobacco and Logan Ridge

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

Diversification Opportunities for Japan Tobacco and Logan Ridge

-0.56

Correlation Coefficient

Japan Tobacco  Logan Ridge

Excellent diversification

The 3 months correlation between Japan and Logan is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Logan Ridge go up and down completely randomly.

Pair Corralation between Japan Tobacco and Logan Ridge

Assuming the 90 days horizon Japan Tobacco ADR is expected to under-perform the Logan Ridge. But the pink sheet apears to be less risky and, when comparing its historical volatility, Japan Tobacco ADR is 1.69 times less risky than Logan Ridge. The pink sheet trades about -0.41 of its potential returns per unit of risk. The Logan Ridge Finance is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,598  in Logan Ridge Finance on September 28, 2024 and sell it today you would lose (121.00) from holding Logan Ridge Finance or give up 4.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Japan Tobacco ADR  vs.  Logan Ridge Finance

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 abnormal 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.

Logan Ridge Finance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Logan Ridge is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Japan Tobacco and Logan Ridge

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

The idea behind Japan Tobacco ADR and Logan Ridge Finance 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.