Correlation Between British American and Credit Acceptance
Can any of the company-specific risk be diversified away by investing in both British American and Credit Acceptance 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 Credit Acceptance 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 Credit Acceptance, you can compare the effects of market volatilities on British American and Credit Acceptance 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 Credit Acceptance. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Credit Acceptance.
Diversification Opportunities for British American and Credit Acceptance
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Credit is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Credit Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Acceptance 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 Credit Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Acceptance has no effect on the direction of British American i.e., British American and Credit Acceptance go up and down completely randomly.
Pair Corralation between British American and Credit Acceptance
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.44 times more return on investment than Credit Acceptance. However, British American Tobacco is 2.28 times less risky than Credit Acceptance. It trades about 0.25 of its potential returns per unit of risk. Credit Acceptance is currently generating about -0.22 per unit of risk. If you would invest 4,590 in British American Tobacco on January 22, 2025 and sell it today you would earn a total of 316.00 from holding British American Tobacco or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Credit Acceptance
Performance |
| Timeline |
| British American Tobacco |
| Credit Acceptance |
British American and Credit Acceptance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Credit Acceptance
The main advantage of trading using opposite British American and Credit Acceptance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Credit Acceptance 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 Credit Acceptance will offset losses from the drop in Credit Acceptance's long position.| British American vs. Healthcare Realty Trust | British American vs. Monster Beverage | British American vs. Check Point Software | British American vs. Cardinal Health, |
| Credit Acceptance vs. Darden Restaurants, | Credit Acceptance vs. Molson Coors Beverage | Credit Acceptance vs. Zoom Video Communications | Credit Acceptance vs. Iron Mountain Incorporated |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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