Correlation Between British American and Nova Wellness
Can any of the company-specific risk be diversified away by investing in both British American and Nova Wellness 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 Nova Wellness 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 Nova Wellness Group, you can compare the effects of market volatilities on British American and Nova Wellness 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 Nova Wellness. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Nova Wellness.
Diversification Opportunities for British American and Nova Wellness
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between British and Nova is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Nova Wellness Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Wellness Group 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 Nova Wellness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Wellness Group has no effect on the direction of British American i.e., British American and Nova Wellness go up and down completely randomly.
Pair Corralation between British American and Nova Wellness
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.42 times more return on investment than Nova Wellness. However, British American Tobacco is 2.36 times less risky than Nova Wellness. It trades about -0.05 of its potential returns per unit of risk. Nova Wellness Group is currently generating about -0.08 per unit of risk. If you would invest 736.00 in British American Tobacco on October 26, 2024 and sell it today you would lose (13.00) from holding British American Tobacco or give up 1.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Nova Wellness Group
Performance |
| Timeline |
| British American Tobacco |
| Nova Wellness Group |
British American and Nova Wellness Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Nova Wellness
The main advantage of trading using opposite British American and Nova Wellness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Nova Wellness 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 Nova Wellness will offset losses from the drop in Nova Wellness' long position.| British American vs. Apex Healthcare Bhd | British American vs. Farm Price Holdings | British American vs. KPJ Healthcare Bhd | British American vs. YTL Hospitality REIT |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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