Correlation Between JAPAN TOBACCO and AEON STORES

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

By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and AEON STORES, you can compare the effects of market volatilities on JAPAN TOBACCO and AEON STORES 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 AEON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and AEON STORES.

Diversification Opportunities for JAPAN TOBACCO and AEON STORES

-0.66

Correlation Coefficient

JAPAN TOBACCO  AEON STORES

Excellent diversification

The 3 months correlation between JAPAN and AEON is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and AEON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON STORES 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 UNSPADR12 are associated (or correlated) with AEON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON STORES has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and AEON STORES go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and AEON STORES

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to generate 1.05 times more return on investment than AEON STORES. However, JAPAN TOBACCO is 1.05 times more volatile than AEON STORES. It trades about 0.14 of its potential returns per unit of risk. AEON STORES is currently generating about -0.13 per unit of risk. If you would invest  1,160  in JAPAN TOBACCO UNSPADR12 on March 13, 2024 and sell it today you would earn a total of  140.00  from holding JAPAN TOBACCO UNSPADR12 or generate 12.07% return on investment over 90 days.

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

JAPAN TOBACCO UNSPADR12  vs.  AEON STORES

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN TOBACCO UNSPADR12 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JAPAN TOBACCO may actually be approaching a critical reversion point that can send shares even higher in July 2024.

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with JAPAN TOBACCO and AEON STORES

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

The idea behind JAPAN TOBACCO UNSPADR12 and AEON STORES 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..