Correlation Between British American and OneSavings Bank
Can any of the company-specific risk be diversified away by investing in both British American and OneSavings Bank 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 OneSavings Bank 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 OneSavings Bank PLC, you can compare the effects of market volatilities on British American and OneSavings Bank 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 OneSavings Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and OneSavings Bank.
Diversification Opportunities for British American and OneSavings Bank
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between British and OneSavings is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and OneSavings Bank PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OneSavings Bank 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 OneSavings Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OneSavings Bank PLC has no effect on the direction of British American i.e., British American and OneSavings Bank go up and down completely randomly.
Pair Corralation between British American and OneSavings Bank
Assuming the 90 days trading horizon British American is expected to generate 1.62 times less return on investment than OneSavings Bank. But when comparing it to its historical volatility, British American Tobacco is 2.74 times less risky than OneSavings Bank. It trades about 0.65 of its potential returns per unit of risk. OneSavings Bank PLC is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 35,380 in OneSavings Bank PLC on September 2, 2024 and sell it today you would earn a total of 4,860 from holding OneSavings Bank PLC or generate 13.74% 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. OneSavings Bank PLC
Performance |
| Timeline |
| British American Tobacco |
| OneSavings Bank PLC |
British American and OneSavings Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and OneSavings Bank
The main advantage of trading using opposite British American and OneSavings Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, OneSavings Bank 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 OneSavings Bank will offset losses from the drop in OneSavings Bank's long position.| British American vs. Uniper SE | British American vs. Mulberry Group PLC | British American vs. London Security Plc | British American vs. Triad Group PLC |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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