Correlation Between JAPAN TOBACCO and ADRIATIC METALS

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

By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and ADRIATIC METALS LS 013355, you can compare the effects of market volatilities on JAPAN TOBACCO and ADRIATIC METALS 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 ADRIATIC METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and ADRIATIC METALS.

Diversification Opportunities for JAPAN TOBACCO and ADRIATIC METALS

-0.14

Correlation Coefficient

JAPAN TOBACCO  ADRIATIC METALS

Good diversification

The 3 months correlation between JAPAN and ADRIATIC is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and ADRIATIC METALS LS 013355 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADRIATIC METALS LS 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 UNSPADR12 are associated (or correlated) with ADRIATIC METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADRIATIC METALS LS has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and ADRIATIC METALS go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and ADRIATIC METALS

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.48 times more return on investment than ADRIATIC METALS. However, JAPAN TOBACCO UNSPADR12 is 2.09 times less risky than ADRIATIC METALS. It trades about 0.05 of its potential returns per unit of risk. ADRIATIC METALS LS 013355 is currently generating about 0.02 per unit of risk. If you would invest  820.00  in JAPAN TOBACCO UNSPADR12 on October 11, 2024 and sell it today you would earn a total of  350.00  from holding JAPAN TOBACCO UNSPADR12 or generate 42.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

JAPAN TOBACCO UNSPADR12  vs.  ADRIATIC METALS LS 013355

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAPAN TOBACCO UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

ADRIATIC METALS LS

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ADRIATIC METALS LS 013355 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ADRIATIC METALS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with JAPAN TOBACCO and ADRIATIC METALS

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

The idea behind JAPAN TOBACCO UNSPADR12 and ADRIATIC METALS LS 013355 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.