Correlation Between British American and Computer Forms
Can any of the company-specific risk be diversified away by investing in both British American and Computer Forms 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 Computer Forms 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 Computer Forms Bhd, you can compare the effects of market volatilities on British American and Computer Forms 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 Computer Forms. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Computer Forms.
Diversification Opportunities for British American and Computer Forms
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between British and Computer is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Computer Forms Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Forms 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 Computer Forms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Forms Bhd has no effect on the direction of British American i.e., British American and Computer Forms go up and down completely randomly.
Pair Corralation between British American and Computer Forms
Assuming the 90 days trading horizon British American Tobacco is expected to under-perform the Computer Forms. But the stock apears to be less risky and, when comparing its historical volatility, British American Tobacco is 3.8 times less risky than Computer Forms. The stock trades about -0.03 of its potential returns per unit of risk. The Computer Forms Bhd is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Computer Forms Bhd on August 31, 2024 and sell it today you would lose (7.00) from holding Computer Forms Bhd or give up 36.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
British American Tobacco vs. Computer Forms Bhd
Performance |
| Timeline |
| British American Tobacco |
| Computer Forms Bhd |
British American and Computer Forms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Computer Forms
The main advantage of trading using opposite British American and Computer Forms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Computer Forms 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 Computer Forms will offset losses from the drop in Computer Forms' long position.| British American vs. DC HEALTHCARE HOLDINGS | British American vs. PMB Technology Bhd | British American vs. Magni Tech Industries | British American vs. Senheng New Retail |
| Computer Forms vs. MClean Technologies Bhd | Computer Forms vs. Digistar Bhd | Computer Forms vs. Minetech Resources Bhd | Computer Forms vs. Swift Haulage 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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