Correlation Between JAPAN TOBACCO and Shimano

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

Diversification Opportunities for JAPAN TOBACCO and Shimano

0.19

Correlation Coefficient

JAPAN TOBACCO  Shimano

Average diversification

The 3 months correlation between JAPAN and Shimano is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Shimano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and Shimano go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and Shimano

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 0.93 times more return on investment than Shimano. However, JAPAN TOBACCO UNSPADR12 is 1.08 times less risky than Shimano. It trades about -0.02 of its potential returns per unit of risk. Shimano is currently generating about -0.08 per unit of risk. If you would invest  1,220  in JAPAN TOBACCO UNSPADR12 on October 8, 2024 and sell it today you would lose (20.00) from holding JAPAN TOBACCO UNSPADR12 or give up 1.64% of portfolio value over 90 days.

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

JAPAN TOBACCO UNSPADR12  vs.  Shimano

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shimano

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with JAPAN TOBACCO and Shimano

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

The idea behind JAPAN TOBACCO UNSPADR12 and Shimano 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.