Correlation Between Federal Realty and British American
Can any of the company-specific risk be diversified away by investing in both Federal Realty and British American 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 Federal Realty and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Realty Investment and British American Tobacco, you can compare the effects of market volatilities on Federal Realty and British American 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 Federal Realty with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and British American.
Diversification Opportunities for Federal Realty and British American
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and British is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Federal Realty 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 Federal Realty Investment are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Federal Realty i.e., Federal Realty and British American go up and down completely randomly.
Pair Corralation between Federal Realty and British American
Assuming the 90 days trading horizon Federal Realty is expected to generate 1.29 times less return on investment than British American. In addition to that, Federal Realty is 1.3 times more volatile than British American Tobacco. It trades about 0.39 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.65 per unit of volatility. If you would invest 3,503 in British American Tobacco on September 2, 2024 and sell it today you would earn a total of 294.00 from holding British American Tobacco or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Federal Realty Investment vs. British American Tobacco
Performance |
| Timeline |
| Federal Realty Investment |
| British American Tobacco |
Federal Realty and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Realty and British American
The main advantage of trading using opposite Federal Realty and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Federal Realty vs. Uniper SE | Federal Realty vs. Mulberry Group PLC | Federal Realty vs. London Security Plc | Federal Realty vs. Triad Group PLC |
| British American vs. Uniper SE | British American vs. Mulberry Group PLC | British American vs. London Security Plc | British American vs. Triad Group PLC |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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