Correlation Between British American and Argo Group
Can any of the company-specific risk be diversified away by investing in both British American and Argo Group 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 Argo Group 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 Argo Group Limited, you can compare the effects of market volatilities on British American and Argo Group 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 Argo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Argo Group.
Diversification Opportunities for British American and Argo Group
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between British and Argo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Argo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group Limited 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 Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group Limited has no effect on the direction of British American i.e., British American and Argo Group go up and down completely randomly.
Pair Corralation between British American and Argo Group
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.41 times more return on investment than Argo Group. However, British American Tobacco is 2.44 times less risky than Argo Group. It trades about 0.3 of its potential returns per unit of risk. Argo Group Limited is currently generating about 0.01 per unit of risk. If you would invest 3,569 in British American Tobacco on September 15, 2024 and sell it today you would earn a total of 192.00 from holding British American Tobacco or generate 5.38% 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. Argo Group Limited
Performance |
| Timeline |
| British American Tobacco |
| Argo Group Limited |
British American and Argo Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Argo Group
The main advantage of trading using opposite British American and Argo Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Argo Group 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 Argo Group will offset losses from the drop in Argo Group's long position.| British American vs. Samsung Electronics Co | British American vs. Samsung Electronics Co | British American vs. Hyundai Motor | British American vs. Reliance Industries Ltd |
| Argo Group vs. Catalyst Media Group | Argo Group vs. CATLIN GROUP | Argo Group vs. Tamburi Investment Partners | Argo Group vs. Magnora ASA |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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