Correlation Between JAPAN TOBACCO and BOOM LOGISTICS

Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and BOOM LOGISTICS 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 BOOM LOGISTICS 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 BOOM LOGISTICS LTD, you can compare the effects of market volatilities on JAPAN TOBACCO and BOOM LOGISTICS 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 BOOM LOGISTICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and BOOM LOGISTICS.

Diversification Opportunities for JAPAN TOBACCO and BOOM LOGISTICS

-0.24

Correlation Coefficient

JAPAN TOBACCO  BOOM LOGISTICS

Very good diversification

The 3 months correlation between JAPAN and BOOM is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and BOOM LOGISTICS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOOM LOGISTICS LTD 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 BOOM LOGISTICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOOM LOGISTICS LTD has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and BOOM LOGISTICS go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and BOOM LOGISTICS

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the BOOM LOGISTICS. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 1.79 times less risky than BOOM LOGISTICS. The stock trades about -0.04 of its potential returns per unit of risk. The BOOM LOGISTICS LTD is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  82.00  in BOOM LOGISTICS LTD on December 20, 2024 and sell it today you would lose (2.00) from holding BOOM LOGISTICS LTD or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

JAPAN TOBACCO UNSPADR12  vs.  BOOM LOGISTICS LTD

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

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 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.

BOOM LOGISTICS LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days BOOM LOGISTICS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BOOM LOGISTICS 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 BOOM LOGISTICS

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

The idea behind JAPAN TOBACCO UNSPADR12 and BOOM LOGISTICS LTD 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.