Correlation Between Japan Tobacco and WILLIS LEASE

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

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

Diversification Opportunities for Japan Tobacco and WILLIS LEASE

0.41

Correlation Coefficient

Japan Tobacco  WILLIS LEASE

Very weak diversification

The 3 months correlation between Japan and WILLIS is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and WILLIS LEASE go up and down completely randomly.

Pair Corralation between Japan Tobacco and WILLIS LEASE

Assuming the 90 days horizon Japan Tobacco is expected to generate 0.42 times more return on investment than WILLIS LEASE. However, Japan Tobacco is 2.36 times less risky than WILLIS LEASE. It trades about 0.02 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about -0.06 per unit of risk. If you would invest  2,438  in Japan Tobacco on December 22, 2024 and sell it today you would earn a total of  24.00  from holding Japan Tobacco or generate 0.98% return on investment over 90 days.

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

Japan Tobacco  vs.  WILLIS LEASE FIN

Japan Tobacco

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco are ranked lower than 1 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Japan Tobacco and WILLIS LEASE

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

The idea behind Japan Tobacco and WILLIS LEASE FIN 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.