Correlation Between Guangdong Investment and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and Japan Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment and Japan Tobacco, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Japan Tobacco.
Diversification Opportunities for Guangdong Investment and Japan Tobacco
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Guangdong and Japan is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment i.e., Guangdong Investment and Japan Tobacco go up and down completely randomly.
Pair Corralation between Guangdong Investment and Japan Tobacco
Assuming the 90 days horizon Guangdong Investment is expected to generate 1.05 times less return on investment than Japan Tobacco. But when comparing it to its historical volatility, Guangdong Investment is 2.76 times less risky than Japan Tobacco. It trades about 0.04 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,013 in Japan Tobacco on May 1, 2025 and sell it today you would lose (13.00) from holding Japan Tobacco or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment vs. Japan Tobacco
Performance |
| Timeline |
| Guangdong Investment |
| Japan Tobacco |
Guangdong Investment and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Japan Tobacco
The main advantage of trading using opposite Guangdong Investment and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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.| Guangdong Investment vs. American Water Works | Guangdong Investment vs. California Water Service | Guangdong Investment vs. Middlesex Water | Guangdong Investment vs. American States Water |
| Japan Tobacco vs. Japan Tobacco ADR | Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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