Correlation Between Japan Tobacco and 191216CX6

Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and 191216CX6 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 191216CX6 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 COCA COLA CO, you can compare the effects of market volatilities on Japan Tobacco and 191216CX6 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 191216CX6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and 191216CX6.

Diversification Opportunities for Japan Tobacco and 191216CX6

0.03

Correlation Coefficient

Japan Tobacco  191216CX6

Significant diversification

The 3 months correlation between Japan and 191216CX6 is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO 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 191216CX6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and 191216CX6 go up and down completely randomly.

Pair Corralation between Japan Tobacco and 191216CX6

Assuming the 90 days horizon Japan Tobacco is expected to generate 29.28 times less return on investment than 191216CX6. But when comparing it to its historical volatility, Japan Tobacco ADR is 41.0 times less risky than 191216CX6. It trades about 0.06 of its potential returns per unit of risk. COCA COLA CO is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,840  in COCA COLA CO on September 26, 2024 and sell it today you would earn a total of  386.00  from holding COCA COLA CO or generate 5.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.76%
Values	Daily Returns

Japan Tobacco ADR  vs.  COCA COLA CO

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.

COCA A CO

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COCA COLA CO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, 191216CX6 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Japan Tobacco and 191216CX6

The main advantage of trading using opposite Japan Tobacco and 191216CX6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, 191216CX6 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 191216CX6 will offset losses from the drop in 191216CX6's long position.

The idea behind Japan Tobacco ADR and COCA COLA CO 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 Transaction History module to view history of all your transactions and understand their impact on performance.