Correlation Between Japan Tobacco and SALESFORCE INC

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

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

Diversification Opportunities for Japan Tobacco and SALESFORCE INC

0.78

Correlation Coefficient

Japan Tobacco  SALESFORCE INC

Poor diversification

The 3 months correlation between Japan and SALESFORCE is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and SALESFORCE INC CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALESFORCE INC CDR 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 SALESFORCE INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALESFORCE INC CDR has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and SALESFORCE INC go up and down completely randomly.

Pair Corralation between Japan Tobacco and SALESFORCE INC

Assuming the 90 days horizon Japan Tobacco is expected to generate 0.52 times more return on investment than SALESFORCE INC. However, Japan Tobacco is 1.93 times less risky than SALESFORCE INC. It trades about -0.08 of its potential returns per unit of risk. SALESFORCE INC CDR is currently generating about -0.05 per unit of risk. If you would invest  2,648  in Japan Tobacco on April 23, 2025 and sell it today you would lose (175.00) from holding Japan Tobacco or give up 6.61% of portfolio value over 90 days.

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

Japan Tobacco  vs.  SALESFORCE INC CDR

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SALESFORCE INC CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SALESFORCE INC CDR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Japan Tobacco and SALESFORCE INC

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

The idea behind Japan Tobacco and SALESFORCE INC CDR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.