Correlation Between JAPAN TOBACCO and ASPEN PHARUNADR

Can any of the company-specific risk be diversified away by investing in both JAPAN TOBACCO and ASPEN PHARUNADR 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 ASPEN PHARUNADR 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 ASPEN PHARUNADR 1, you can compare the effects of market volatilities on JAPAN TOBACCO and ASPEN PHARUNADR 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 ASPEN PHARUNADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and ASPEN PHARUNADR.

Diversification Opportunities for JAPAN TOBACCO and ASPEN PHARUNADR

0.22

Correlation Coefficient

JAPAN TOBACCO  ASPEN PHARUNADR

Modest diversification

The 3 months correlation between JAPAN and ASPEN is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and ASPEN PHARUNADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN PHARUNADR 1 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 ASPEN PHARUNADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN PHARUNADR 1 has no effect on the direction of JAPAN TOBACCO i.e., JAPAN TOBACCO and ASPEN PHARUNADR go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and ASPEN PHARUNADR

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the ASPEN PHARUNADR. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 3.08 times less risky than ASPEN PHARUNADR. The stock trades about -0.17 of its potential returns per unit of risk. The ASPEN PHARUNADR 1 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  545.00  in ASPEN PHARUNADR 1 on April 23, 2025 and sell it today you would lose (15.00) from holding ASPEN PHARUNADR 1 or give up 2.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

JAPAN TOBACCO UNSPADR12  vs.  ASPEN PHARUNADR 1

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

Very Weak

Over the last 90 days JAPAN TOBACCO UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

ASPEN PHARUNADR 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASPEN PHARUNADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with JAPAN TOBACCO and ASPEN PHARUNADR

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

The idea behind JAPAN TOBACCO UNSPADR12 and ASPEN PHARUNADR 1 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.