Correlation Between Kaiser Aluminum and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum and Japan Tobacco 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 Kaiser Aluminum and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and Japan Tobacco, you can compare the effects of market volatilities on Kaiser Aluminum and Japan Tobacco 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 Kaiser Aluminum with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and Japan Tobacco.
Diversification Opportunities for Kaiser Aluminum and Japan Tobacco
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kaiser and Japan is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Kaiser Aluminum 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 Kaiser Aluminum are associated (or correlated) with Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Japan Tobacco go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and Japan Tobacco
Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 1.24 times more return on investment than Japan Tobacco. However, Kaiser Aluminum is 1.24 times more volatile than Japan Tobacco. It trades about -0.03 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.06 per unit of risk. If you would invest 6,723 in Kaiser Aluminum on December 5, 2024 and sell it today you would lose (223.00) from holding Kaiser Aluminum or give up 3.32% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 97.67% |
Values | Daily Returns |
Kaiser Aluminum vs. Japan Tobacco
Performance |
Timeline |
Kaiser Aluminum |
Japan Tobacco |
Kaiser Aluminum and Japan Tobacco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kaiser Aluminum and Japan Tobacco
The main advantage of trading using opposite Kaiser Aluminum and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum position performs unexpectedly, Japan Tobacco 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.Kaiser Aluminum vs. MOLSON RS BEVERAGE | Kaiser Aluminum vs. Computer And Technologies | Kaiser Aluminum vs. BC TECHNOLOGY GROUP | Kaiser Aluminum vs. Darden Restaurants |
Japan Tobacco vs. Sotherly Hotels | Japan Tobacco vs. BW OFFSHORE LTD | Japan Tobacco vs. Hyatt Hotels | Japan Tobacco vs. Tencent Music Entertainment |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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