Correlation Between Associated British and Heavitree Brewery
Can any of the company-specific risk be diversified away by investing in both Associated British and Heavitree Brewery 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 Associated British and Heavitree Brewery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Heavitree Brewery, you can compare the effects of market volatilities on Associated British and Heavitree Brewery 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 Associated British with a short position of Heavitree Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Heavitree Brewery.
Diversification Opportunities for Associated British and Heavitree Brewery
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and Heavitree is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Heavitree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heavitree Brewery and Associated British 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 Associated British Foods are associated (or correlated) with Heavitree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heavitree Brewery has no effect on the direction of Associated British i.e., Associated British and Heavitree Brewery go up and down completely randomly.
Pair Corralation between Associated British and Heavitree Brewery
Assuming the 90 days trading horizon Associated British Foods is expected to generate 2.28 times more return on investment than Heavitree Brewery. However, Associated British is 2.28 times more volatile than Heavitree Brewery. It trades about 0.04 of its potential returns per unit of risk. Heavitree Brewery is currently generating about 0.0 per unit of risk. If you would invest 186,013 in Associated British Foods on August 30, 2024 and sell it today you would earn a total of 33,487 from holding Associated British Foods or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Heavitree Brewery
Performance |
| Timeline |
| Associated British Foods |
| Heavitree Brewery |
Associated British and Heavitree Brewery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Heavitree Brewery
The main advantage of trading using opposite Associated British and Heavitree Brewery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Heavitree Brewery 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 Heavitree Brewery will offset losses from the drop in Heavitree Brewery's long position.| Associated British vs. Samsung Electronics Co | Associated British vs. Samsung Electronics Co | Associated British vs. Toyota Motor Corp | Associated British vs. MOL Hungarian Oil |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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