Correlation Between Japan Tobacco and Vita Coco

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

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

Diversification Opportunities for Japan Tobacco and Vita Coco

-0.63

Correlation Coefficient

Japan Tobacco  Vita Coco

Excellent diversification

The 3 months correlation between Japan and Vita is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco ADR and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 ADR are associated (or correlated) with Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Vita Coco go up and down completely randomly.

Pair Corralation between Japan Tobacco and Vita Coco

Assuming the 90 days horizon Japan Tobacco ADR is expected to generate 0.66 times more return on investment than Vita Coco. However, Japan Tobacco ADR is 1.52 times less risky than Vita Coco. It trades about -0.02 of its potential returns per unit of risk. Vita Coco is currently generating about -0.03 per unit of risk. If you would invest  1,585  in Japan Tobacco ADR on May 7, 2025 and sell it today you would lose (30.00) from holding Japan Tobacco ADR or give up 1.89% of portfolio value over 90 days.

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

Japan Tobacco ADR  vs.  Vita Coco

Japan Tobacco ADR

Risk-Adjusted Performance

Weakest

Over the last 90 days Japan Tobacco ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Japan Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vita Coco

Risk-Adjusted Performance

Weakest

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Vita Coco is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Japan Tobacco and Vita Coco

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

The idea behind Japan Tobacco ADR and Vita Coco 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.