Correlation Between BRITISH AMERICAN and STAR AFRICA
Can any of the company-specific risk be diversified away by investing in both BRITISH AMERICAN and STAR AFRICA 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 STAR AFRICA 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 STAR AFRICA PORATION, you can compare the effects of market volatilities on BRITISH AMERICAN and STAR AFRICA 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 STAR AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRITISH AMERICAN and STAR AFRICA.
Diversification Opportunities for BRITISH AMERICAN and STAR AFRICA
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BRITISH and STAR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BRITISH AMERICAN TOBACCO and STAR AFRICA PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STAR AFRICA PORATION 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 STAR AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STAR AFRICA PORATION has no effect on the direction of BRITISH AMERICAN i.e., BRITISH AMERICAN and STAR AFRICA go up and down completely randomly.
Pair Corralation between BRITISH AMERICAN and STAR AFRICA
Assuming the 90 days trading horizon BRITISH AMERICAN TOBACCO is expected to under-perform the STAR AFRICA. In addition to that, BRITISH AMERICAN is 1.16 times more volatile than STAR AFRICA PORATION. It trades about -0.16 of its total potential returns per unit of risk. STAR AFRICA PORATION is currently generating about 0.41 per unit of volatility. If you would invest 200.00 in STAR AFRICA PORATION on November 28, 2024 and sell it today you would earn a total of 99.00 from holding STAR AFRICA PORATION or generate 49.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
BRITISH AMERICAN TOBACCO vs. STAR AFRICA PORATION
Performance |
| Timeline |
| BRITISH AMERICAN TOBACCO |
| STAR AFRICA PORATION |
BRITISH AMERICAN and STAR AFRICA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRITISH AMERICAN and STAR AFRICA
The main advantage of trading using opposite BRITISH AMERICAN and STAR AFRICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRITISH AMERICAN position performs unexpectedly, STAR AFRICA 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 STAR AFRICA will offset losses from the drop in STAR AFRICA's long position.| BRITISH AMERICAN vs. TANGANDA TEA PANY | BRITISH AMERICAN vs. Revitus Property Opportunities | BRITISH AMERICAN vs. ECONET WIRELESS HOLDINGS | BRITISH AMERICAN vs. FIRST MUTUAL PROPERTIES |
| STAR AFRICA vs. RIO ZIM LIMITED | STAR AFRICA vs. Tigere Real Estate | STAR AFRICA vs. Datvest Modified Consumer | STAR AFRICA vs. ECOCASH HOLDINGS ZIMBABWE |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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