Correlation Between Japan Tobacco and Ubisoft Entertainment

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

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

Diversification Opportunities for Japan Tobacco and Ubisoft Entertainment

-0.36

Correlation Coefficient

Japan Tobacco  Ubisoft Entertainment

Very good diversification

The 3 months correlation between Japan and Ubisoft is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Ubisoft Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between Japan Tobacco and Ubisoft Entertainment

Assuming the 90 days horizon Japan Tobacco is expected to under-perform the Ubisoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Japan Tobacco is 3.81 times less risky than Ubisoft Entertainment. The stock trades about -0.02 of its potential returns per unit of risk. The Ubisoft Entertainment SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,197  in Ubisoft Entertainment SA on September 22, 2024 and sell it today you would earn a total of  47.00  from holding Ubisoft Entertainment SA or generate 3.93% return on investment over 90 days.

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

Japan Tobacco  vs.  Ubisoft Entertainment SA

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

Ubisoft Entertainment

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Japan Tobacco and Ubisoft Entertainment

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

The idea behind Japan Tobacco and Ubisoft Entertainment SA 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.