Correlation Between Oriental Food and British American
Can any of the company-specific risk be diversified away by investing in both Oriental 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 Oriental 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 Oriental Food Industries and British American Tobacco, you can compare the effects of market volatilities on Oriental 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 Oriental Food with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Food and British American.
Diversification Opportunities for Oriental Food and British American
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Oriental and British is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Food Industries 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 Oriental 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 Oriental Food Industries 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 Oriental Food i.e., Oriental Food and British American go up and down completely randomly.
Pair Corralation between Oriental Food and British American
Assuming the 90 days trading horizon Oriental Food Industries is expected to generate 1.79 times more return on investment than British American. However, Oriental Food is 1.79 times more volatile than British American Tobacco. It trades about 0.06 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.04 per unit of risk. If you would invest 114.00 in Oriental Food Industries on September 12, 2024 and sell it today you would earn a total of 53.00 from holding Oriental Food Industries or generate 46.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Oriental Food Industries vs. British American Tobacco
Performance |
| Timeline |
| Oriental Food Industries |
| British American Tobacco |
Oriental Food and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oriental Food and British American
The main advantage of trading using opposite Oriental Food and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oriental 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.| Oriental Food vs. Nestle Bhd | Oriental Food vs. British American Tobacco | Oriental Food vs. FARM FRESH BERHAD | Oriental Food vs. Kawan Food Bhd |
| British American vs. Nestle Bhd | British American vs. FARM FRESH BERHAD | British American vs. Kawan Food Bhd | British American vs. Apollo Food Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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