Correlation Between Phibro Animal and JAPAN TOBACCO

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

By analyzing existing cross correlation between Phibro Animal Health and JAPAN TOBACCO UNSPADR12, you can compare the effects of market volatilities on Phibro Animal and JAPAN TOBACCO 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 Phibro Animal with a short position of JAPAN TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phibro Animal and JAPAN TOBACCO.

Diversification Opportunities for Phibro Animal and JAPAN TOBACCO

-0.65

Correlation Coefficient

Phibro Animal  JAPAN TOBACCO

Excellent diversification

The 3 months correlation between Phibro and JAPAN is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health and JAPAN TOBACCO UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN TOBACCO UNSPADR12 and Phibro Animal 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 Phibro Animal Health are associated (or correlated) with JAPAN TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN TOBACCO UNSPADR12 has no effect on the direction of Phibro Animal i.e., Phibro Animal and JAPAN TOBACCO go up and down completely randomly.

Pair Corralation between Phibro Animal and JAPAN TOBACCO

Assuming the 90 days horizon Phibro Animal Health is expected to generate 2.14 times more return on investment than JAPAN TOBACCO. However, Phibro Animal is 2.14 times more volatile than JAPAN TOBACCO UNSPADR12. It trades about 0.28 of its potential returns per unit of risk. JAPAN TOBACCO UNSPADR12 is currently generating about -0.09 per unit of risk. If you would invest  1,493  in Phibro Animal Health on April 23, 2025 and sell it today you would earn a total of  1,047  from holding Phibro Animal Health or generate 70.13% return on investment over 90 days.

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

Phibro Animal Health  vs.  JAPAN TOBACCO UNSPADR12

Phibro Animal Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Phibro Animal reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Phibro Animal and JAPAN TOBACCO

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

The idea behind Phibro Animal Health and JAPAN TOBACCO UNSPADR12 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.