Correlation Between JAPAN TOBACCO and MUTUIONLINE

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

Diversification Opportunities for JAPAN TOBACCO and MUTUIONLINE

0.24

Correlation Coefficient

JAPAN TOBACCO  MUTUIONLINE

Modest diversification

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

Pair Corralation between JAPAN TOBACCO and MUTUIONLINE

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the MUTUIONLINE. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 2.35 times less risky than MUTUIONLINE. The stock trades about -0.19 of its potential returns per unit of risk. The MUTUIONLINE is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,855  in MUTUIONLINE on September 24, 2024 and sell it today you would lose (25.00) from holding MUTUIONLINE or give up 0.65% of portfolio value over 90 days.

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

JAPAN TOBACCO UNSPADR12  vs.  MUTUIONLINE

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 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.

MUTUIONLINE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MUTUIONLINE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, MUTUIONLINE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN TOBACCO and MUTUIONLINE

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

The idea behind JAPAN TOBACCO UNSPADR12 and MUTUIONLINE 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.