Correlation Between JAPAN TOBACCO and SIEM OFFSHORE

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

Diversification Opportunities for JAPAN TOBACCO and SIEM OFFSHORE

0.34

Correlation Coefficient

JAPAN TOBACCO  SIEM OFFSHORE

Weak diversification

The 3 months correlation between JAPAN and SIEM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and SIEM OFFSHORE NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIEM OFFSHORE NEW 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 SIEM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIEM OFFSHORE NEW has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and SIEM OFFSHORE go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and SIEM OFFSHORE

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.6 times more return on investment than SIEM OFFSHORE. However, JAPAN TOBACCO UNSPADR12 is 1.67 times less risky than SIEM OFFSHORE. It trades about 0.03 of its potential returns per unit of risk. SIEM OFFSHORE NEW is currently generating about -0.01 per unit of risk. If you would invest  1,240  in JAPAN TOBACCO UNSPADR12 on August 31, 2024 and sell it today you would earn a total of  30.00  from holding JAPAN TOBACCO UNSPADR12 or generate 2.42% return on investment over 90 days.

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

JAPAN TOBACCO UNSPADR12  vs.  SIEM OFFSHORE NEW

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 2 (%) 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.

SIEM OFFSHORE NEW

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with JAPAN TOBACCO and SIEM OFFSHORE

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

The idea behind JAPAN TOBACCO UNSPADR12 and SIEM OFFSHORE NEW 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.