Correlation Between British American and Gamma Communications
Can any of the company-specific risk be diversified away by investing in both British American and Gamma Communications 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 Gamma Communications 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 Gamma Communications PLC, you can compare the effects of market volatilities on British American and Gamma Communications 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 Gamma Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Gamma Communications.
Diversification Opportunities for British American and Gamma Communications
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Gamma is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Gamma Communications PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamma Communications PLC 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 Gamma Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamma Communications PLC has no effect on the direction of British American i.e., British American and Gamma Communications go up and down completely randomly.
Pair Corralation between British American and Gamma Communications
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.94 times more return on investment than Gamma Communications. However, British American Tobacco is 1.07 times less risky than Gamma Communications. It trades about -0.11 of its potential returns per unit of risk. Gamma Communications PLC is currently generating about -0.42 per unit of risk. If you would invest 3,739 in British American Tobacco on October 10, 2024 and sell it today you would lose (90.00) from holding British American Tobacco or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Gamma Communications PLC
Performance |
| Timeline |
| British American Tobacco |
| Gamma Communications PLC |
British American and Gamma Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Gamma Communications
The main advantage of trading using opposite British American and Gamma Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Gamma Communications 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 Gamma Communications will offset losses from the drop in Gamma Communications' long position.| British American vs. Creo Medical Group | British American vs. STMicroelectronics NV | British American vs. Zoom Video Communications | British American vs. Cairo Communication SpA |
| Gamma Communications vs. LPKF Laser Electronics | Gamma Communications vs. Heavitree Brewery | Gamma Communications vs. PureTech Health plc | Gamma Communications vs. Monster Beverage Corp |
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 CEOs Directory module to screen CEOs from public companies around the world.
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