Correlation Between British American and CSC Steel
Can any of the company-specific risk be diversified away by investing in both British American and CSC Steel 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 CSC Steel 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 CSC Steel Holdings, you can compare the effects of market volatilities on British American and CSC Steel 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 CSC Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and CSC Steel.
Diversification Opportunities for British American and CSC Steel
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and CSC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and CSC Steel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSC Steel Holdings 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 CSC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSC Steel Holdings has no effect on the direction of British American i.e., British American and CSC Steel go up and down completely randomly.
Pair Corralation between British American and CSC Steel
Assuming the 90 days trading horizon British American Tobacco is expected to under-perform the CSC Steel. But the stock apears to be less risky and, when comparing its historical volatility, British American Tobacco is 1.11 times less risky than CSC Steel. The stock trades about -0.04 of its potential returns per unit of risk. The CSC Steel Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 110.00 in CSC Steel Holdings on August 26, 2024 and sell it today you would earn a total of 9.00 from holding CSC Steel Holdings or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. CSC Steel Holdings
Performance |
| Timeline |
| British American Tobacco |
| CSC Steel Holdings |
British American and CSC Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and CSC Steel
The main advantage of trading using opposite British American and CSC Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, CSC Steel 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 CSC Steel will offset losses from the drop in CSC Steel's long position.| British American vs. Press Metal Bhd | British American vs. MI Technovation Bhd | British American vs. Binasat Communications Bhd | British American vs. Aurelius Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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