Correlation Between British American and Dell Technologies
Can any of the company-specific risk be diversified away by investing in both British American and Dell Technologies 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 Dell Technologies 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 Dell Technologies, you can compare the effects of market volatilities on British American and Dell Technologies 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 Dell Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Dell Technologies.
Diversification Opportunities for British American and Dell Technologies
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between British and Dell is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of British American i.e., British American and Dell Technologies go up and down completely randomly.
Pair Corralation between British American and Dell Technologies
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.28 times more return on investment than Dell Technologies. However, British American Tobacco is 3.63 times less risky than Dell Technologies. It trades about 0.64 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.11 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. Dell Technologies
Performance |
| Timeline |
| British American Tobacco |
| Dell Technologies |
British American and Dell Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Dell Technologies
The main advantage of trading using opposite British American and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Dell Technologies 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 Dell Technologies will offset losses from the drop in Dell Technologies' 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 |
| Dell Technologies vs. Positivo Tecnologia SA | Dell Technologies vs. Fras le SA | Dell Technologies vs. Energisa SA | Dell Technologies vs. Clave Indices De |
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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