Correlation Between British American and Apartment Investment
Can any of the company-specific risk be diversified away by investing in both British American and Apartment Investment 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 British American and Apartment Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Apartment Investment and, you can compare the effects of market volatilities on British American and Apartment Investment 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 British American with a short position of Apartment Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Apartment Investment.
Diversification Opportunities for British American and Apartment Investment
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Apartment is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and British American 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 British American Tobacco are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of British American i.e., British American and Apartment Investment go up and down completely randomly.
Pair Corralation between British American and Apartment Investment
Assuming the 90 days trading horizon British American is expected to generate 1.33 times less return on investment than Apartment Investment. But when comparing it to its historical volatility, British American Tobacco is 1.28 times less risky than Apartment Investment. It trades about 0.02 of its potential returns per unit of risk. Apartment Investment and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,361 in Apartment Investment and on August 23, 2024 and sell it today you would earn a total of 739.00 from holding Apartment Investment and or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
British American Tobacco vs. Apartment Investment and
Performance |
| Timeline |
| British American Tobacco |
| Apartment Investment and |
British American and Apartment Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Apartment Investment
The main advantage of trading using opposite British American and Apartment Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Apartment Investment 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 Apartment Investment will offset losses from the drop in Apartment Investment's long position.| British American vs. BTG Pactual Logstica | British American vs. Plano Plano Desenvolvimento | British American vs. Companhia Habitasul de | British American vs. The Procter Gamble |
| Apartment Investment vs. BTG Pactual Logstica | Apartment Investment vs. Plano Plano Desenvolvimento | Apartment Investment vs. Companhia Habitasul de | Apartment Investment vs. The Procter Gamble |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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