Correlation Between British American and Banco BTG
Can any of the company-specific risk be diversified away by investing in both British American and Banco BTG 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 Banco BTG 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 Banco BTG Pactual, you can compare the effects of market volatilities on British American and Banco BTG 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 Banco BTG. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Banco BTG.
Diversification Opportunities for British American and Banco BTG
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between British and Banco is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Banco BTG Pactual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco BTG Pactual 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 Banco BTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco BTG Pactual has no effect on the direction of British American i.e., British American and Banco BTG go up and down completely randomly.
Pair Corralation between British American and Banco BTG
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.41 times more return on investment than Banco BTG. However, British American Tobacco is 2.46 times less risky than Banco BTG. It trades about 0.64 of its potential returns per unit of risk. Banco BTG Pactual is currently generating about -0.15 per unit of risk. If you would invest 4,066 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 501.00 from holding British American Tobacco or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Banco BTG Pactual
Performance |
| Timeline |
| British American Tobacco |
| Banco BTG Pactual |
British American and Banco BTG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Banco BTG
The main advantage of trading using opposite British American and Banco BTG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Banco BTG 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 Banco BTG will offset losses from the drop in Banco BTG's long position.| British American vs. Fras le SA | British American vs. Energisa SA | British American vs. Clave Indices De | British American vs. BTG Pactual Logstica |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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