Correlation Between Poste Italiane and British American
Can any of the company-specific risk be diversified away by investing in both Poste Italiane 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 Poste Italiane and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Poste Italiane SpA and British American Tobacco, you can compare the effects of market volatilities on Poste Italiane 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 Poste Italiane with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Poste Italiane and British American.
Diversification Opportunities for Poste Italiane and British American
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Poste and British is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Poste Italiane SpA 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 Poste Italiane 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 Poste Italiane SpA 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 Poste Italiane i.e., Poste Italiane and British American go up and down completely randomly.
Pair Corralation between Poste Italiane and British American
Assuming the 90 days horizon Poste Italiane SpA is expected to generate 0.69 times more return on investment than British American. However, Poste Italiane SpA is 1.45 times less risky than British American. It trades about 0.22 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.11 per unit of risk. If you would invest 1,188 in Poste Italiane SpA on November 2, 2024 and sell it today you would earn a total of 268.00 from holding Poste Italiane SpA or generate 22.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Poste Italiane SpA vs. British American Tobacco
Performance |
| Timeline |
| Poste Italiane SpA |
| British American Tobacco |
Poste Italiane and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Poste Italiane and British American
The main advantage of trading using opposite Poste Italiane and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Poste Italiane 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.| Poste Italiane vs. Platinum Investment Management | Poste Italiane vs. Magnachip Semiconductor | Poste Italiane vs. Monument Mining Limited | Poste Italiane vs. MagnaChip Semiconductor Corp |
| British American vs. Algonquin Power Utilities | British American vs. Cleanaway Waste Management | British American vs. Moneysupermarket Group PLC | British American vs. United Utilities Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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