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
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Kaiser and Japan is -0.16. 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 under-perform the Japan Tobacco. In addition to that, Kaiser Aluminum is 1.34 times more volatile than Japan Tobacco. It trades about -0.04 of its total potential returns per unit of risk. Japan Tobacco is currently generating about 0.07 per unit of volatility. If you would invest 2,443 in Japan Tobacco on December 28, 2024 and sell it today you would earn a total of 139.00 from holding Japan Tobacco or generate 5.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
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. Kingdee International Software | Kaiser Aluminum vs. GEELY AUTOMOBILE | Kaiser Aluminum vs. CARSALESCOM | Kaiser Aluminum vs. Firan Technology Group |
Japan Tobacco vs. ETFS Coffee ETC | Japan Tobacco vs. PREMIER FOODS | Japan Tobacco vs. Lifeway Foods | Japan Tobacco vs. Suntory Beverage Food |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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