Correlation Between British American and Cable One
Can any of the company-specific risk be diversified away by investing in both British American and Cable One 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 Cable One 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 Cable One, you can compare the effects of market volatilities on British American and Cable One 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 Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Cable One.
Diversification Opportunities for British American and Cable One
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between British and Cable is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of British American i.e., British American and Cable One go up and down completely randomly.
Pair Corralation between British American and Cable One
Assuming the 90 days trading horizon British American is expected to generate 2.02 times less return on investment than Cable One. But when comparing it to its historical volatility, British American Tobacco is 2.04 times less risky than Cable One. It trades about 0.45 of its potential returns per unit of risk. Cable One is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 986.00 in Cable One on August 27, 2024 and sell it today you would earn a total of 187.00 from holding Cable One or generate 18.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Cable One
Performance |
| Timeline |
| British American Tobacco |
| Cable One |
British American and Cable One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Cable One
The main advantage of trading using opposite British American and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One's long position.| British American vs. Fras le SA | British American vs. Clave Indices De | British American vs. BTG Pactual Logstica | British American vs. Telefonaktiebolaget LM Ericsson |
| Cable One vs. Monster Beverage | Cable One vs. Cognizant Technology Solutions | Cable One vs. Palantir Technologies | Cable One vs. Paycom Software |
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 Stocks Directory module to find actively traded stocks across global markets.
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