Correlation Between Japan Tobacco and Compugroup Medical

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

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

Diversification Opportunities for Japan Tobacco and Compugroup Medical

0.02

Correlation Coefficient

Japan Tobacco  Compugroup Medical

Significant diversification

The 3 months correlation between Japan and Compugroup is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Compugroup Medical SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugroup Medical 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 Compugroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugroup Medical has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Compugroup Medical go up and down completely randomly.

Pair Corralation between Japan Tobacco and Compugroup Medical

Assuming the 90 days horizon Japan Tobacco is expected to generate 4.18 times less return on investment than Compugroup Medical. But when comparing it to its historical volatility, Japan Tobacco is 2.67 times less risky than Compugroup Medical. It trades about 0.01 of its potential returns per unit of risk. Compugroup Medical SE is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,374  in Compugroup Medical SE on September 29, 2024 and sell it today you would lose (204.00) from holding Compugroup Medical SE or give up 8.59% of portfolio value over 90 days.

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

Japan Tobacco  vs.  Compugroup Medical SE

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 nearly stable basic indicators, Japan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Compugroup Medical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compugroup Medical SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compugroup Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Tobacco and Compugroup Medical

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

The idea behind Japan Tobacco and Compugroup Medical SE 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.