Correlation Between KIMBERLY and Japan Tobacco

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

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

Diversification Opportunities for KIMBERLY and Japan Tobacco

-0.14

Correlation Coefficient

KIMBERLY  Japan Tobacco

Good diversification

The 3 months correlation between KIMBERLY and Japan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KIMBERLY CLARK P and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR and KIMBERLY 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 KIMBERLY CLARK P 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 ADR has no effect on the direction of KIMBERLY i.e., KIMBERLY and Japan Tobacco go up and down completely randomly.

Pair Corralation between KIMBERLY and Japan Tobacco

Assuming the 90 days trading horizon KIMBERLY CLARK P is expected to under-perform the Japan Tobacco. In addition to that, KIMBERLY is 1.01 times more volatile than Japan Tobacco ADR. It trades about -0.21 of its total potential returns per unit of risk. Japan Tobacco ADR is currently generating about -0.1 per unit of volatility. If you would invest  1,455  in Japan Tobacco ADR on September 16, 2024 and sell it today you would lose (96.00) from holding Japan Tobacco ADR or give up 6.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	53.85%
Values	Daily Returns

KIMBERLY CLARK P  vs.  Japan Tobacco ADR

KIMBERLY CLARK P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIMBERLY CLARK P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KIMBERLY CLARK P investors.

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.

Pair Trading with KIMBERLY and Japan Tobacco

The main advantage of trading using opposite KIMBERLY and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIMBERLY 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 KIMBERLY CLARK P and Japan Tobacco ADR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..