Correlation Between Turning Point and Japan Tobacco

Can any of the company-specific risk be diversified away by investing in both Turning Point 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 Turning Point and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Turning Point Brands and Japan Tobacco, you can compare the effects of market volatilities on Turning Point 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 Turning Point with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Japan Tobacco.

Diversification Opportunities for Turning Point and Japan Tobacco

0.03

Correlation Coefficient

Turning Point  Japan Tobacco

Significant diversification

The 3 months correlation between Turning and Japan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Turning Point 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 Turning Point Brands 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 Turning Point i.e., Turning Point and Japan Tobacco go up and down completely randomly.

Pair Corralation between Turning Point and Japan Tobacco

Considering the 90-day investment horizon Turning Point Brands is expected to generate 0.46 times more return on investment than Japan Tobacco. However, Turning Point Brands is 2.18 times less risky than Japan Tobacco. It trades about 0.09 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.02 per unit of risk. If you would invest  6,183  in Turning Point Brands on November 29, 2024 and sell it today you would earn a total of  670.00  from holding Turning Point Brands or generate 10.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.1%
Values	Daily Returns

Turning Point Brands  vs.  Japan Tobacco

Turning Point Brands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Turning Point may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Japan Tobacco

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco are ranked lower than 1 (%) 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.

Pair Trading with Turning Point and Japan Tobacco

The main advantage of trading using opposite Turning Point and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Turning Point 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.

The idea behind Turning Point Brands and Japan Tobacco 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.