Correlation Between British American and OReilly Automotive
Can any of the company-specific risk be diversified away by investing in both British American and OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive, you can compare the effects of market volatilities on British American and OReilly Automotive 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 OReilly Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and OReilly Automotive.
Diversification Opportunities for British American and OReilly Automotive
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between British and OReilly is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive 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 OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of British American i.e., British American and OReilly Automotive go up and down completely randomly.
Pair Corralation between British American and OReilly Automotive
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.67 times more return on investment than OReilly Automotive. However, British American Tobacco is 1.48 times less risky than OReilly Automotive. It trades about 0.37 of its potential returns per unit of risk. OReilly Automotive is currently generating about -0.02 per unit of risk. If you would invest 3,967 in British American Tobacco on August 24, 2024 and sell it today you would earn a total of 320.00 from holding British American Tobacco or generate 8.07% 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. OReilly Automotive
Performance |
| Timeline |
| British American Tobacco |
| OReilly Automotive |
British American and OReilly Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and OReilly Automotive
The main advantage of trading using opposite British American and OReilly Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, OReilly Automotive 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 OReilly Automotive will offset losses from the drop in OReilly Automotive'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 |
| OReilly Automotive vs. Charter Communications | OReilly Automotive vs. Paycom Software | OReilly Automotive vs. Technos SA | OReilly Automotive vs. Palantir Technologies |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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