Correlation Between National Storage and Japan Tobacco

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

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

Diversification Opportunities for National Storage and Japan Tobacco

0.44

Correlation Coefficient

National Storage  Japan Tobacco

Very weak diversification

The 3 months correlation between National and Japan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding National Storage Affiliates and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and National Storage 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 National Storage Affiliates 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 National Storage i.e., National Storage and Japan Tobacco go up and down completely randomly.

Pair Corralation between National Storage and Japan Tobacco

Assuming the 90 days horizon National Storage Affiliates is expected to under-perform the Japan Tobacco. In addition to that, National Storage is 1.01 times more volatile than Japan Tobacco. It trades about -0.04 of its total potential returns per unit of risk. Japan Tobacco is currently generating about 0.09 per unit of volatility. If you would invest  2,540  in Japan Tobacco on September 17, 2024 and sell it today you would earn a total of  50.00  from holding Japan Tobacco or generate 1.97% return on investment over 90 days.

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

National Storage Affiliates  vs.  Japan Tobacco

National Storage Aff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Japan Tobacco

Risk-Adjusted Performance

1 of 100

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Storage and Japan Tobacco

The main advantage of trading using opposite National Storage and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Storage 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 National Storage Affiliates 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 Stocks Directory module to find actively traded stocks across global markets.