Correlation Between UmweltBank and JAPAN TOBACCO

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

By analyzing existing cross correlation between UmweltBank AG and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on UmweltBank 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 UmweltBank with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of UmweltBank and JAPAN TOBACCO.

Diversification Opportunities for UmweltBank and JAPAN TOBACCO

0.28

Correlation Coefficient

UmweltBank  JAPAN TOBACCO

Modest diversification

The 3 months correlation between UmweltBank and JAPAN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and UmweltBank 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 UmweltBank AG 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 UNSPADR12 has no effect on the direction of UmweltBank i.e., UmweltBank and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between UmweltBank and JAPAN TOBACCO

Assuming the 90 days trading horizon UmweltBank AG is expected to under-perform the JAPAN TOBACCO. In addition to that, UmweltBank is 1.08 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about -0.05 of its total potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about 0.0 per unit of volatility. If you would invest  1,188  in JAPAN TOBACCO UNSPADR12 on October 25, 2024 and sell it today you would lose (38.00) from holding JAPAN TOBACCO UNSPADR12 or give up 3.2% of portfolio value over 90 days.

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

UmweltBank AG  vs.  JAPAN TOBACCO UNSPADR12

UmweltBank AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UmweltBank is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with UmweltBank and JAPAN TOBACCO

The main advantage of trading using opposite UmweltBank and JAPAN TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UmweltBank 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 UmweltBank AG and JAPAN TOBACCO UNSPADR12 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.