Correlation Between British American and Movida Participaes
Can any of the company-specific risk be diversified away by investing in both British American and Movida Participaes 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 Movida Participaes 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 Movida Participaes SA, you can compare the effects of market volatilities on British American and Movida Participaes 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 Movida Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Movida Participaes.
Diversification Opportunities for British American and Movida Participaes
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between British and Movida is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Movida Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Movida Participaes 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 Movida Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Movida Participaes has no effect on the direction of British American i.e., British American and Movida Participaes go up and down completely randomly.
Pair Corralation between British American and Movida Participaes
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.16 times more return on investment than Movida Participaes. However, British American Tobacco is 6.19 times less risky than Movida Participaes. It trades about 0.64 of its potential returns per unit of risk. Movida Participaes SA is currently generating about -0.09 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Movida Participaes SA
Performance |
| Timeline |
| British American Tobacco |
| Movida Participaes |
British American and Movida Participaes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Movida Participaes
The main advantage of trading using opposite British American and Movida Participaes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Movida Participaes 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 Movida Participaes will offset losses from the drop in Movida Participaes' 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 |
| Movida Participaes vs. METISA Metalrgica Timboense | Movida Participaes vs. Lupatech SA | Movida Participaes vs. Fras le SA | Movida Participaes vs. Energisa 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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