Correlation Between Japan Tobacco and Crown Castle

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

By analyzing existing cross correlation between Japan Tobacco and Crown Castle International, you can compare the effects of market volatilities on Japan Tobacco and Crown Castle 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 Crown Castle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Crown Castle.

Diversification Opportunities for Japan Tobacco and Crown Castle

0.39

Correlation Coefficient

Japan Tobacco  Crown Castle

Weak diversification

The 3 months correlation between Japan and Crown is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Crown Castle International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Castle Interna 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 are associated (or correlated) with Crown Castle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Castle Interna has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Crown Castle go up and down completely randomly.

Pair Corralation between Japan Tobacco and Crown Castle

Assuming the 90 days horizon Japan Tobacco is expected to generate 1.01 times more return on investment than Crown Castle. However, Japan Tobacco is 1.01 times more volatile than Crown Castle International. It trades about 0.04 of its potential returns per unit of risk. Crown Castle International is currently generating about -0.04 per unit of risk. If you would invest  1,876  in Japan Tobacco on October 4, 2024 and sell it today you would earn a total of  567.00  from holding Japan Tobacco or generate 30.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Japan Tobacco  vs.  Crown Castle International

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 fragile 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.

Crown Castle Interna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Castle International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Japan Tobacco and Crown Castle

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

The idea behind Japan Tobacco and Crown Castle International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.