Correlation Between BRITISH AMERICAN and ZB FINANCIAL
Can any of the company-specific risk be diversified away by investing in both BRITISH AMERICAN and ZB FINANCIAL 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 ZB FINANCIAL 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 ZB FINANCIAL HOLDINGS, you can compare the effects of market volatilities on BRITISH AMERICAN and ZB FINANCIAL 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 ZB FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRITISH AMERICAN and ZB FINANCIAL.
Diversification Opportunities for BRITISH AMERICAN and ZB FINANCIAL
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between BRITISH and ZBFH is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding BRITISH AMERICAN TOBACCO and ZB FINANCIAL HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZB FINANCIAL HOLDINGS 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 ZB FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZB FINANCIAL HOLDINGS has no effect on the direction of BRITISH AMERICAN i.e., BRITISH AMERICAN and ZB FINANCIAL go up and down completely randomly.
Pair Corralation between BRITISH AMERICAN and ZB FINANCIAL
Assuming the 90 days trading horizon BRITISH AMERICAN TOBACCO is expected to generate 1.47 times more return on investment than ZB FINANCIAL. However, BRITISH AMERICAN is 1.47 times more volatile than ZB FINANCIAL HOLDINGS. It trades about -0.02 of its potential returns per unit of risk. ZB FINANCIAL HOLDINGS is currently generating about -0.16 per unit of risk. If you would invest 1,199,995 in BRITISH AMERICAN TOBACCO on November 6, 2024 and sell it today you would lose (209,995) from holding BRITISH AMERICAN TOBACCO or give up 17.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRITISH AMERICAN TOBACCO vs. ZB FINANCIAL HOLDINGS
Performance |
| Timeline |
| BRITISH AMERICAN TOBACCO |
| ZB FINANCIAL HOLDINGS |
BRITISH AMERICAN and ZB FINANCIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRITISH AMERICAN and ZB FINANCIAL
The main advantage of trading using opposite BRITISH AMERICAN and ZB FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRITISH AMERICAN position performs unexpectedly, ZB FINANCIAL 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 ZB FINANCIAL will offset losses from the drop in ZB FINANCIAL'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 |
| ZB FINANCIAL vs. STAR AFRICA PORATION | ZB FINANCIAL vs. CAFCA LIMITED | ZB FINANCIAL vs. FIRST MUTUAL PROPERTIES | ZB FINANCIAL vs. AFRICAN DISTILLERS LIMITED |
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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