Correlation Between BRITISH AMERICAN and AFRICAN DISTILLERS
Can any of the company-specific risk be diversified away by investing in both BRITISH AMERICAN and AFRICAN DISTILLERS 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 AFRICAN DISTILLERS 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 AFRICAN DISTILLERS LIMITED, you can compare the effects of market volatilities on BRITISH AMERICAN and AFRICAN DISTILLERS 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 AFRICAN DISTILLERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRITISH AMERICAN and AFRICAN DISTILLERS.
Diversification Opportunities for BRITISH AMERICAN and AFRICAN DISTILLERS
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BRITISH and AFRICAN is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BRITISH AMERICAN TOBACCO and AFRICAN DISTILLERS LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFRICAN DISTILLERS 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 AFRICAN DISTILLERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFRICAN DISTILLERS has no effect on the direction of BRITISH AMERICAN i.e., BRITISH AMERICAN and AFRICAN DISTILLERS go up and down completely randomly.
Pair Corralation between BRITISH AMERICAN and AFRICAN DISTILLERS
Assuming the 90 days trading horizon BRITISH AMERICAN TOBACCO is expected to generate 14.25 times more return on investment than AFRICAN DISTILLERS. However, BRITISH AMERICAN is 14.25 times more volatile than AFRICAN DISTILLERS LIMITED. It trades about 0.27 of its potential returns per unit of risk. AFRICAN DISTILLERS LIMITED is currently generating about 0.22 per unit of risk. If you would invest 803,600 in BRITISH AMERICAN TOBACCO on October 28, 2024 and sell it today you would earn a total of 186,400 from holding BRITISH AMERICAN TOBACCO or generate 23.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRITISH AMERICAN TOBACCO vs. AFRICAN DISTILLERS LIMITED
Performance |
| Timeline |
| BRITISH AMERICAN TOBACCO |
| AFRICAN DISTILLERS |
BRITISH AMERICAN and AFRICAN DISTILLERS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRITISH AMERICAN and AFRICAN DISTILLERS
The main advantage of trading using opposite BRITISH AMERICAN and AFRICAN DISTILLERS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRITISH AMERICAN position performs unexpectedly, AFRICAN DISTILLERS 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 AFRICAN DISTILLERS will offset losses from the drop in AFRICAN DISTILLERS's long position.| BRITISH AMERICAN vs. STAR AFRICA PORATION | BRITISH AMERICAN vs. CAFCA LIMITED | BRITISH AMERICAN vs. FIRST MUTUAL PROPERTIES | BRITISH AMERICAN vs. AFRICAN DISTILLERS LIMITED |
| AFRICAN DISTILLERS vs. FIRST MUTUAL PROPERTIES | AFRICAN DISTILLERS vs. BRITISH AMERICAN TOBACCO | AFRICAN DISTILLERS vs. TANGANDA TEA PANY | AFRICAN DISTILLERS vs. ZB FINANCIAL HOLDINGS |
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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