Correlation Between British American and Gold Fields
Can any of the company-specific risk be diversified away by investing in both British American and Gold Fields 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 Gold Fields 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 Gold Fields Limited, you can compare the effects of market volatilities on British American and Gold Fields 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 Gold Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Gold Fields.
Diversification Opportunities for British American and Gold Fields
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Gold is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Gold Fields Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields Limited 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields Limited has no effect on the direction of British American i.e., British American and Gold Fields go up and down completely randomly.
Pair Corralation between British American and Gold Fields
Assuming the 90 days trading horizon British American is expected to generate 2.72 times less return on investment than Gold Fields. But when comparing it to its historical volatility, British American Tobacco is 1.92 times less risky than Gold Fields. It trades about 0.04 of its potential returns per unit of risk. Gold Fields Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,694 in Gold Fields Limited on September 14, 2024 and sell it today you would earn a total of 1,810 from holding Gold Fields Limited or generate 67.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.79% |
| Values | Daily Returns |
British American Tobacco vs. Gold Fields Limited
Performance |
| Timeline |
| British American Tobacco |
| Gold Fields Limited |
British American and Gold Fields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Gold Fields
The main advantage of trading using opposite British American and Gold Fields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Gold Fields 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 Gold Fields will offset losses from the drop in Gold Fields' long position.| British American vs. Nordon Indstrias Metalrgicas | British American vs. T Mobile | British American vs. Take Two Interactive Software | British American vs. Unity Software |
| Gold Fields vs. Paycom Software | Gold Fields vs. Unifique Telecomunicaes SA | Gold Fields vs. Spotify Technology SA | Gold Fields vs. Telecomunicaes Brasileiras SA |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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