Correlation Between Japan Tobacco and Addtech AB

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

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

Diversification Opportunities for Japan Tobacco and Addtech AB

0.45

Correlation Coefficient

Japan Tobacco  Addtech AB

Very weak diversification

The 3 months correlation between Japan and Addtech is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB 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 Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Addtech AB go up and down completely randomly.

Pair Corralation between Japan Tobacco and Addtech AB

Assuming the 90 days horizon Japan Tobacco is expected to under-perform the Addtech AB. But the stock apears to be less risky and, when comparing its historical volatility, Japan Tobacco is 1.6 times less risky than Addtech AB. The stock trades about -0.04 of its potential returns per unit of risk. The Addtech AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,668  in Addtech AB on April 21, 2025 and sell it today you would earn a total of  350.00  from holding Addtech AB or generate 13.12% return on investment over 90 days.

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

Japan Tobacco  vs.  Addtech AB

Japan Tobacco

Risk-Adjusted Performance

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

Addtech AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Addtech AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Tobacco and Addtech AB

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

The idea behind Japan Tobacco and Addtech AB 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.