Correlation Between Japan Tobacco and Xinhua Winshare

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

By analyzing existing cross correlation between Japan Tobacco and Xinhua Winshare Publishing, you can compare the effects of market volatilities on Japan Tobacco and Xinhua Winshare 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 Xinhua Winshare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Tobacco and Xinhua Winshare.

Diversification Opportunities for Japan Tobacco and Xinhua Winshare

-0.48

Correlation Coefficient

Japan Tobacco  Xinhua Winshare

Very good diversification

The 3 months correlation between Japan and Xinhua is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Xinhua Winshare Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinhua Winshare Publ 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 are associated (or correlated) with Xinhua Winshare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinhua Winshare Publ has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Xinhua Winshare go up and down completely randomly.

Pair Corralation between Japan Tobacco and Xinhua Winshare

Assuming the 90 days horizon Japan Tobacco is expected to generate 1.13 times less return on investment than Xinhua Winshare. In addition to that, Japan Tobacco is 1.01 times more volatile than Xinhua Winshare Publishing. It trades about 0.18 of its total potential returns per unit of risk. Xinhua Winshare Publishing is currently generating about 0.21 per unit of volatility. If you would invest  109.00  in Xinhua Winshare Publishing on September 4, 2024 and sell it today you would earn a total of  7.00  from holding Xinhua Winshare Publishing or generate 6.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Japan Tobacco  vs.  Xinhua Winshare Publishing

Japan Tobacco

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xinhua Winshare Publ

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xinhua Winshare Publishing are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xinhua Winshare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Tobacco and Xinhua Winshare

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

The idea behind Japan Tobacco and Xinhua Winshare Publishing 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.