Correlation Between Cairo Communication and British American
Can any of the company-specific risk be diversified away by investing in both Cairo Communication 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 Cairo Communication and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairo Communication SpA and British American Tobacco, you can compare the effects of market volatilities on Cairo Communication 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 Cairo Communication with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairo Communication and British American.
Diversification Opportunities for Cairo Communication and British American
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cairo and British is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cairo Communication SpA 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 Cairo Communication 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 Cairo Communication SpA 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 Cairo Communication i.e., Cairo Communication and British American go up and down completely randomly.
Pair Corralation between Cairo Communication and British American
Assuming the 90 days trading horizon Cairo Communication SpA is expected to generate 1.42 times more return on investment than British American. However, Cairo Communication is 1.42 times more volatile than British American Tobacco. It trades about -0.03 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.07 per unit of risk. If you would invest 247.00 in Cairo Communication SpA on October 11, 2024 and sell it today you would lose (3.00) from holding Cairo Communication SpA or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairo Communication SpA vs. British American Tobacco
Performance |
| Timeline |
| Cairo Communication SpA |
| British American Tobacco |
Cairo Communication and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairo Communication and British American
The main advantage of trading using opposite Cairo Communication and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairo Communication 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.| Cairo Communication vs. Metals Exploration Plc | Cairo Communication vs. Panther Metals PLC | Cairo Communication vs. Europa Metals | Cairo Communication vs. Wheaton Precious Metals |
| British American vs. Panther Metals PLC | British American vs. Cornish Metals | British American vs. Futura Medical | British American vs. Lundin Mining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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