Correlation Between Yuexiu Transport and Japan Tobacco

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

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

Diversification Opportunities for Yuexiu Transport and Japan Tobacco

0.0

Correlation Coefficient

Yuexiu Transport  Japan Tobacco

Pay attention - limited upside

The 3 months correlation between Yuexiu and Japan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Yuexiu Transport Infrastructur 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 Yuexiu Transport 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 Yuexiu Transport Infrastructure 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 Yuexiu Transport i.e., Yuexiu Transport and Japan Tobacco go up and down completely randomly.

Pair Corralation between Yuexiu Transport and Japan Tobacco

Assuming the 90 days horizon Yuexiu Transport Infrastructure is expected to generate 2.44 times more return on investment than Japan Tobacco. However, Yuexiu Transport is 2.44 times more volatile than Japan Tobacco ADR. It trades about 0.1 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.11 per unit of risk. If you would invest  32.00  in Yuexiu Transport Infrastructure on February 22, 2024 and sell it today you would earn a total of  26.00  from holding Yuexiu Transport Infrastructure or generate 81.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Yuexiu Transport Infrastructur  vs.  Japan Tobacco ADR

Yuexiu Transport Inf

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Yuexiu Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Tobacco ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Japan Tobacco may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Yuexiu Transport and Japan Tobacco

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

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.