Correlation Between Old Dominion and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Old Dominion 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 Old Dominion and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Dominion Freight and Japan Tobacco ADR, you can compare the effects of market volatilities on Old Dominion 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 Old Dominion with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Japan Tobacco.
Diversification Opportunities for Old Dominion and Japan Tobacco
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Old and Japan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR and Old Dominion 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 Old Dominion Freight 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 ADR has no effect on the direction of Old Dominion i.e., Old Dominion and Japan Tobacco go up and down completely randomly.
Pair Corralation between Old Dominion and Japan Tobacco
Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Japan Tobacco. In addition to that, Old Dominion is 1.78 times more volatile than Japan Tobacco ADR. It trades about -0.01 of its total potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.01 per unit of volatility. If you would invest 1,287 in Japan Tobacco ADR on September 24, 2024 and sell it today you would earn a total of 33.00 from holding Japan Tobacco ADR or generate 2.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.6% |
Values | Daily Returns |
Old Dominion Freight vs. Japan Tobacco ADR
Performance |
Timeline |
Old Dominion Freight |
Japan Tobacco ADR |
Old Dominion and Japan Tobacco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Old Dominion and Japan Tobacco
The main advantage of trading using opposite Old Dominion and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion 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.Old Dominion vs. Marten Transport | Old Dominion vs. Werner Enterprises | Old Dominion vs. Universal Logistics Holdings | Old Dominion vs. Schneider National |
Japan Tobacco vs. Universal | Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. Philip Morris International |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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