Correlation Between Associated British and Polar Capital
Can any of the company-specific risk be diversified away by investing in both Associated British and Polar Capital 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 Polar Capital 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 Polar Capital Technology, you can compare the effects of market volatilities on Associated British and Polar Capital 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 Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Polar Capital.
Diversification Opportunities for Associated British and Polar Capital
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Polar is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of Associated British i.e., Associated British and Polar Capital go up and down completely randomly.
Pair Corralation between Associated British and Polar Capital
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Polar Capital. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.01 times less risky than Polar Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Polar Capital Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 25,500 in Polar Capital Technology on September 12, 2024 and sell it today you would earn a total of 8,600 from holding Polar Capital Technology or generate 33.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Polar Capital Technology
Performance |
| Timeline |
| Associated British Foods |
| Polar Capital Technology |
Associated British and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Polar Capital
The main advantage of trading using opposite Associated British and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.| Associated British vs. Inspiration Healthcare Group | Associated British vs. Universal Health Services | Associated British vs. Naturhouse Health SA | Associated British vs. Gamma Communications PLC |
| Polar Capital vs. Beowulf Mining | Polar Capital vs. Atalaya Mining | Polar Capital vs. Caledonia Mining | Polar Capital vs. Cairo Communication SpA |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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