Correlation Between IMPERIAL TOBACCO and NTT DATA

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

By analyzing existing cross correlation between IMPERIAL TOBACCO and NTT DATA , you can compare the effects of market volatilities on IMPERIAL TOBACCO and NTT DATA 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 IMPERIAL TOBACCO with a short position of NTT DATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and NTT DATA.

Diversification Opportunities for IMPERIAL TOBACCO and NTT DATA

-0.49

Correlation Coefficient

IMPERIAL TOBACCO  NTT DATA

Very good diversification

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

Pair Corralation between IMPERIAL TOBACCO and NTT DATA

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to under-perform the NTT DATA. But the stock apears to be less risky and, when comparing its historical volatility, IMPERIAL TOBACCO is 2.5 times less risky than NTT DATA. The stock trades about -0.03 of its potential returns per unit of risk. The NTT DATA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,670  in NTT DATA on April 24, 2025 and sell it today you would earn a total of  590.00  from holding NTT DATA or generate 35.33% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  NTT DATA

IMPERIAL TOBACCO

Risk-Adjusted Performance

Very Weak

Over the last 90 days IMPERIAL TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IMPERIAL TOBACCO is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

NTT DATA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NTT DATA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, NTT DATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IMPERIAL TOBACCO and NTT DATA

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

The idea behind IMPERIAL TOBACCO and NTT DATA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.