Correlation Between British American and Public Bank
Can any of the company-specific risk be diversified away by investing in both British American and Public 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 Public 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 Public Bank Bhd, you can compare the effects of market volatilities on British American and Public 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 Public Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Public Bank.
Diversification Opportunities for British American and Public Bank
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between British and Public is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Public Bank Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Bank Bhd 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 Public Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Bank Bhd has no effect on the direction of British American i.e., British American and Public Bank go up and down completely randomly.
Pair Corralation between British American and Public Bank
Assuming the 90 days trading horizon British American Tobacco is expected to under-perform the Public Bank. In addition to that, British American is 1.31 times more volatile than Public Bank Bhd. It trades about -0.04 of its total potential returns per unit of risk. Public Bank Bhd is currently generating about 0.03 per unit of volatility. If you would invest 405.00 in Public Bank Bhd on August 28, 2024 and sell it today you would earn a total of 40.00 from holding Public Bank Bhd or generate 9.88% 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. Public Bank Bhd
Performance |
| Timeline |
| British American Tobacco |
| Public Bank Bhd |
British American and Public Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Public Bank
The main advantage of trading using opposite British American and Public Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Public 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 Public Bank will offset losses from the drop in Public Bank's long position.| British American vs. Binasat Communications Bhd | British American vs. Choo Bee Metal | British American vs. Cosmos Technology International | British American vs. Supercomnet Technologies Bhd |
| Public Bank vs. Privasia Technology Bhd | Public Bank vs. ONETECH SOLUTIONS HOLDINGS | Public Bank vs. Lysaght Galvanized Steel | Public Bank vs. PMB Technology Bhd |
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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