Correlation Between Japan Tobacco and Oracle

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

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

Diversification Opportunities for Japan Tobacco and Oracle

-0.44

Correlation Coefficient

Japan Tobacco  Oracle

Very good diversification

The 3 months correlation between Japan and Oracle is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Japan Tobacco and Oracle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle 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 Oracle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle has no effect on the direction of Japan Tobacco i.e., Japan Tobacco and Oracle go up and down completely randomly.

Pair Corralation between Japan Tobacco and Oracle

Assuming the 90 days horizon Japan Tobacco is expected to generate 5.55 times less return on investment than Oracle. But when comparing it to its historical volatility, Japan Tobacco is 1.86 times less risky than Oracle. It trades about 0.08 of its potential returns per unit of risk. Oracle is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  14,335  in Oracle on May 15, 2025 and sell it today you would earn a total of  6,500  from holding Oracle or generate 45.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Japan Tobacco  vs.  Oracle

Japan Tobacco

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Tobacco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Tobacco may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Oracle

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Oracle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Tobacco and Oracle

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

The idea behind Japan Tobacco and Oracle 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.