Correlation Between British American and Amedeo Air
Can any of the company-specific risk be diversified away by investing in both British American and Amedeo Air 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 Amedeo Air 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 Amedeo Air Four, you can compare the effects of market volatilities on British American and Amedeo Air 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 Amedeo Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Amedeo Air.
Diversification Opportunities for British American and Amedeo Air
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Amedeo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Amedeo Air Four in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amedeo Air Four 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 Amedeo Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amedeo Air Four has no effect on the direction of British American i.e., British American and Amedeo Air go up and down completely randomly.
Pair Corralation between British American and Amedeo Air
Assuming the 90 days trading horizon British American is expected to generate 1.13 times less return on investment than Amedeo Air. In addition to that, British American is 1.6 times more volatile than Amedeo Air Four. It trades about 0.1 of its total potential returns per unit of risk. Amedeo Air Four is currently generating about 0.18 per unit of volatility. If you would invest 4,054 in Amedeo Air Four on November 1, 2024 and sell it today you would earn a total of 2,246 from holding Amedeo Air Four or generate 55.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
British American Tobacco vs. Amedeo Air Four
Performance |
| Timeline |
| British American Tobacco |
| Amedeo Air Four |
British American and Amedeo Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Amedeo Air
The main advantage of trading using opposite British American and Amedeo Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Amedeo Air 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 Amedeo Air will offset losses from the drop in Amedeo Air's long position.| British American vs. Polar Capital Technology | British American vs. Jacquet Metal Service | British American vs. Gaztransport et Technigaz | British American vs. Empire Metals Limited |
| Amedeo Air vs. Erste Group Bank | Amedeo Air vs. Science in Sport | Amedeo Air vs. Metro Bank PLC | Amedeo Air vs. Discover Financial Services |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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