Correlation Between Japan Tobacco and Newmont

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

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

Diversification Opportunities for Japan Tobacco and Newmont

0.16

Correlation Coefficient

Japan Tobacco  Newmont

Average diversification

The 3 months correlation between Japan and Newmont is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont 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 Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Newmont go up and down completely randomly.

Pair Corralation between Japan Tobacco and Newmont

Assuming the 90 days horizon Japan Tobacco is expected to generate 0.67 times more return on investment than Newmont. However, Japan Tobacco is 1.49 times less risky than Newmont. It trades about 0.04 of its potential returns per unit of risk. Newmont is currently generating about -0.01 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Japan Tobacco  vs.  Newmont

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.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont 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 Newmont

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

The idea behind Japan Tobacco and Newmont 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.