Correlation Between British American and Sparebank
Can any of the company-specific risk be diversified away by investing in both British American and Sparebank 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 British American and Sparebank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Sparebank 1 SR, you can compare the effects of market volatilities on British American and Sparebank 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 British American with a short position of Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Sparebank.
Diversification Opportunities for British American and Sparebank
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between British and Sparebank is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR and British American 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 British American Tobacco are associated (or correlated) with Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of British American i.e., British American and Sparebank go up and down completely randomly.
Pair Corralation between British American and Sparebank
Assuming the 90 days trading horizon British American is expected to generate 1.68 times less return on investment than Sparebank. In addition to that, British American is 1.78 times more volatile than Sparebank 1 SR. It trades about 0.02 of its total potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.06 per unit of volatility. If you would invest 10,213 in Sparebank 1 SR on October 16, 2024 and sell it today you would earn a total of 4,617 from holding Sparebank 1 SR or generate 45.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Sparebank 1 SR
Performance |
| Timeline |
| British American Tobacco |
| Sparebank 1 SR |
British American and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Sparebank
The main advantage of trading using opposite British American and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.| British American vs. Pets at Home | British American vs. Europa Metals | British American vs. Jacquet Metal Service | British American vs. Infrastrutture Wireless Italiane |
| Sparebank vs. National Beverage Corp | Sparebank vs. Beazer Homes USA | Sparebank vs. British American Tobacco | Sparebank vs. Ecclesiastical Insurance Office |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |