Correlation Between British American and Auction Technology
Can any of the company-specific risk be diversified away by investing in both British American and Auction Technology 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 Auction Technology 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 Auction Technology Group, you can compare the effects of market volatilities on British American and Auction Technology 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 Auction Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Auction Technology.
Diversification Opportunities for British American and Auction Technology
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Auction is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology 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 Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of British American i.e., British American and Auction Technology go up and down completely randomly.
Pair Corralation between British American and Auction Technology
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.81 times more return on investment than Auction Technology. However, British American Tobacco is 1.24 times less risky than Auction Technology. It trades about -0.1 of its potential returns per unit of risk. Auction Technology Group is currently generating about -0.33 per unit of risk. If you would invest 3,692 in British American Tobacco on October 13, 2024 and sell it today you would lose (75.00) from holding British American Tobacco or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Auction Technology Group
Performance |
| Timeline |
| British American Tobacco |
| Auction Technology |
British American and Auction Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Auction Technology
The main advantage of trading using opposite British American and Auction Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Auction Technology 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 Auction Technology will offset losses from the drop in Auction Technology's long position.| British American vs. Monks Investment Trust | British American vs. Smithson Investment Trust | British American vs. EJF Investments | British American vs. Zoom Video Communications |
| Auction Technology vs. Wizz Air Holdings | Auction Technology vs. British American Tobacco | Auction Technology vs. Playtech Plc | Auction Technology vs. JD Sports Fashion |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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