Correlation Between Japan Tobacco and G III

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

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

Diversification Opportunities for Japan Tobacco and G III

0.71

Correlation Coefficient

Japan Tobacco  G III

Poor diversification

The 3 months correlation between Japan and GI4 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and G III Apparel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G III Apparel 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 G III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G III Apparel has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and G III go up and down completely randomly.

Pair Corralation between Japan Tobacco and G III

Assuming the 90 days horizon Japan Tobacco is expected to generate 0.41 times more return on investment than G III. However, Japan Tobacco is 2.43 times less risky than G III. It trades about -0.03 of its potential returns per unit of risk. G III Apparel Group is currently generating about -0.02 per unit of risk. If you would invest  2,562  in Japan Tobacco on April 20, 2025 and sell it today you would lose (67.00) from holding Japan Tobacco or give up 2.62% 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.  G III Apparel Group

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

G III Apparel

Risk-Adjusted Performance

Very Weak

Over the last 90 days G III Apparel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, G III is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Japan Tobacco and G III

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

The idea behind Japan Tobacco and G III Apparel Group 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.