Correlation Between Japan Tobacco and WT OFFSHORE

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

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

Diversification Opportunities for Japan Tobacco and WT OFFSHORE

-0.06

Correlation Coefficient

Japan Tobacco  WT OFFSHORE

Good diversification

The 3 months correlation between Japan and UWV is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and WT OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT OFFSHORE 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 WT OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT OFFSHORE has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and WT OFFSHORE go up and down completely randomly.

Pair Corralation between Japan Tobacco and WT OFFSHORE

Assuming the 90 days horizon Japan Tobacco is expected to generate 0.35 times more return on investment than WT OFFSHORE. However, Japan Tobacco is 2.86 times less risky than WT OFFSHORE. It trades about 0.05 of its potential returns per unit of risk. WT OFFSHORE is currently generating about -0.03 per unit of risk. If you would invest  2,548  in Japan Tobacco on August 31, 2024 and sell it today you would earn a total of  92.00  from holding Japan Tobacco or generate 3.61% return on investment over 90 days.

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

Japan Tobacco  vs.  WT OFFSHORE

Japan Tobacco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

WT OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT OFFSHORE 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Japan Tobacco and WT OFFSHORE

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

The idea behind Japan Tobacco and WT OFFSHORE 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.