Correlation Between Bell Food and British American
Can any of the company-specific risk be diversified away by investing in both Bell Food 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 Bell Food and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bell Food Group and British American Tobacco, you can compare the effects of market volatilities on Bell Food 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 Bell Food with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bell Food and British American.
Diversification Opportunities for Bell Food and British American
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bell and British is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bell Food Group 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 Bell Food 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 Bell Food Group 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 Bell Food i.e., Bell Food and British American go up and down completely randomly.
Pair Corralation between Bell Food and British American
Assuming the 90 days trading horizon Bell Food is expected to generate 40.04 times less return on investment than British American. But when comparing it to its historical volatility, Bell Food Group is 1.38 times less risky than British American. It trades about 0.0 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,907 in British American Tobacco on August 25, 2024 and sell it today you would earn a total of 805.00 from holding British American Tobacco or generate 27.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bell Food Group vs. British American Tobacco
Performance |
| Timeline |
| Bell Food Group |
| British American Tobacco |
Bell Food and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bell Food and British American
The main advantage of trading using opposite Bell Food and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bell Food 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.| Bell Food vs. Samsung Electronics Co | Bell Food vs. Samsung Electronics Co | Bell Food vs. Hyundai Motor | Bell Food vs. Toyota Motor Corp |
| British American vs. Samsung Electronics Co | British American vs. Samsung Electronics Co | British American vs. Hyundai Motor | British American vs. Toyota Motor 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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