Correlation Between Japan Tobacco and Molson Coors

Can any of the company-specific risk be diversified away by investing in both Japan Tobacco and Molson Coors 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 Molson Coors 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 Molson Coors Brewing, you can compare the effects of market volatilities on Japan Tobacco and Molson Coors 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 Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Molson Coors.

Diversification Opportunities for Japan Tobacco and Molson Coors

-0.49

Correlation Coefficient

Japan Tobacco  Molson Coors

Very good diversification

The 3 months correlation between Japan and Molson is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Molson Coors Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Brewing 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Brewing has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Molson Coors go up and down completely randomly.

Pair Corralation between Japan Tobacco and Molson Coors

Assuming the 90 days horizon Japan Tobacco ADR is expected to under-perform the Molson Coors. But the pink sheet apears to be less risky and, when comparing its historical volatility, Japan Tobacco ADR is 1.26 times less risky than Molson Coors. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Molson Coors Brewing is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,467  in Molson Coors Brewing on September 22, 2024 and sell it today you would earn a total of  467.00  from holding Molson Coors Brewing or generate 8.54% 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.  Molson Coors Brewing

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Molson Coors Brewing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Japan Tobacco and Molson Coors

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

The idea behind Japan Tobacco ADR and Molson Coors Brewing 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.