Correlation Between Japan Tobacco and Abcellera Biologics

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

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

Diversification Opportunities for Japan Tobacco and Abcellera Biologics

-0.54

Correlation Coefficient

Japan Tobacco  Abcellera Biologics

Excellent diversification

The 3 months correlation between Japan and Abcellera is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Abcellera Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abcellera Biologics and Japan Tobacco 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 Japan Tobacco ADR are associated (or correlated) with Abcellera Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abcellera Biologics has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Abcellera Biologics go up and down completely randomly.

Pair Corralation between Japan Tobacco and Abcellera Biologics

Assuming the 90 days horizon Japan Tobacco ADR is expected to generate 0.33 times more return on investment than Abcellera Biologics. However, Japan Tobacco ADR is 3.04 times less risky than Abcellera Biologics. It trades about 0.06 of its potential returns per unit of risk. Abcellera Biologics is currently generating about -0.06 per unit of risk. If you would invest  1,010  in Japan Tobacco ADR on September 19, 2024 and sell it today you would earn a total of  344.00  from holding Japan Tobacco ADR or generate 34.06% return on investment over 90 days.

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

Japan Tobacco ADR  vs.  Abcellera Biologics

Japan Tobacco ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Tobacco ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Japan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Abcellera Biologics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abcellera Biologics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Abcellera Biologics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Japan Tobacco and Abcellera Biologics

The main advantage of trading using opposite Japan Tobacco and Abcellera Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Tobacco position performs unexpectedly, Abcellera Biologics 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 Abcellera Biologics will offset losses from the drop in Abcellera Biologics' long position.

The idea behind Japan Tobacco ADR and Abcellera Biologics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.