Correlation Between Alfa Financial and British American
Can any of the company-specific risk be diversified away by investing in both Alfa Financial 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 Alfa Financial and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Financial Software and British American Tobacco, you can compare the effects of market volatilities on Alfa Financial 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 Alfa Financial with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and British American.
Diversification Opportunities for Alfa Financial and British American
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Alfa and British is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and British American go up and down completely randomly.
Pair Corralation between Alfa Financial and British American
Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 2.11 times more return on investment than British American. However, Alfa Financial is 2.11 times more volatile than British American Tobacco. It trades about 0.05 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest 208.00 in Alfa Financial Software on October 25, 2024 and sell it today you would earn a total of 22.00 from holding Alfa Financial Software or generate 10.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alfa Financial Software vs. British American Tobacco
Performance |
| Timeline |
| Alfa Financial Software |
| British American Tobacco |
Alfa Financial and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Financial and British American
The main advantage of trading using opposite Alfa Financial and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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.| Alfa Financial vs. Xinhua Winshare Publishing | Alfa Financial vs. CarsalesCom | Alfa Financial vs. Adtalem Global Education | Alfa Financial vs. STRAYER EDUCATION |
| British American vs. FIREWEED METALS P | British American vs. CARDINAL HEALTH | British American vs. GREENX METALS LTD | British American vs. Cardinal Health |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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