Correlation Between Air Transport and British American
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and British American Tobacco, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and British American.
Diversification Opportunities for Air Transport and British American
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Air and British is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services 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 Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and British American go up and down completely randomly.
Pair Corralation between Air Transport and British American
Assuming the 90 days horizon Air Transport is expected to generate 7.67 times less return on investment than British American. But when comparing it to its historical volatility, Air Transport Services is 3.19 times less risky than British American. It trades about 0.04 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,488 in British American Tobacco on November 30, 2024 and sell it today you would earn a total of 256.00 from holding British American Tobacco or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. British American Tobacco
Performance |
| Timeline |
| Air Transport Services |
| British American Tobacco |
Air Transport and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and British American
The main advantage of trading using opposite Air Transport and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. WILLIS LEASE FIN | Air Transport vs. Global Ship Lease | Air Transport vs. Nippon Light Metal | Air Transport vs. JD SPORTS FASH |
| British American vs. CORNISH METALS INC | British American vs. Jacquet Metal Service | British American vs. AIR PRODCHEMICALS | British American vs. SBM OFFSHORE |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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