Correlation Between EIDESVIK OFFSHORE and Japan Tobacco

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

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

Diversification Opportunities for EIDESVIK OFFSHORE and Japan Tobacco

0.2

Correlation Coefficient

EIDESVIK OFFSHORE  Japan Tobacco

Modest diversification

The 3 months correlation between EIDESVIK and Japan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco and EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE NK 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 EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and Japan Tobacco go up and down completely randomly.

Pair Corralation between EIDESVIK OFFSHORE and Japan Tobacco

Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to under-perform the Japan Tobacco. In addition to that, EIDESVIK OFFSHORE is 2.2 times more volatile than Japan Tobacco. It trades about -0.03 of its total potential returns per unit of risk. Japan Tobacco is currently generating about 0.01 per unit of volatility. If you would invest  2,556  in Japan Tobacco on September 19, 2024 and sell it today you would earn a total of  6.00  from holding Japan Tobacco or generate 0.23% return on investment over 90 days.

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

EIDESVIK OFFSHORE NK  vs.  Japan Tobacco

EIDESVIK OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EIDESVIK OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EIDESVIK OFFSHORE is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EIDESVIK OFFSHORE and Japan Tobacco

The main advantage of trading using opposite EIDESVIK OFFSHORE and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE NK 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.