Correlation Between BRITISH AMERICAN and CEC AFRICA
Can any of the company-specific risk be diversified away by investing in both BRITISH AMERICAN and CEC 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 CEC 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 ZAMBIA and CEC AFRICA INVESTMENTS, you can compare the effects of market volatilities on BRITISH AMERICAN and CEC 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 CEC AFRICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRITISH AMERICAN and CEC AFRICA.
Diversification Opportunities for BRITISH AMERICAN and CEC AFRICA
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BRITISH and CEC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BRITISH AMERICAN TOBACCO ZAMBI and CEC AFRICA INVESTMENTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEC AFRICA INVESTMENTS 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 ZAMBIA are associated (or correlated) with CEC AFRICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEC AFRICA INVESTMENTS has no effect on the direction of BRITISH AMERICAN i.e., BRITISH AMERICAN and CEC AFRICA go up and down completely randomly.
Pair Corralation between BRITISH AMERICAN and CEC AFRICA
If you would invest 340.00 in BRITISH AMERICAN TOBACCO ZAMBIA on August 31, 2024 and sell it today you would earn a total of 0.00 from holding BRITISH AMERICAN TOBACCO ZAMBIA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRITISH AMERICAN TOBACCO ZAMBI vs. CEC AFRICA INVESTMENTS
Performance |
| Timeline |
| BRITISH AMERICAN TOB |
| CEC AFRICA INVESTMENTS |
BRITISH AMERICAN and CEC AFRICA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRITISH AMERICAN and CEC AFRICA
The main advantage of trading using opposite BRITISH AMERICAN and CEC AFRICA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRITISH AMERICAN position performs unexpectedly, CEC 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 CEC AFRICA will offset losses from the drop in CEC AFRICA's long position.| BRITISH AMERICAN vs. STANDARD CHARTERED BANK | BRITISH AMERICAN vs. AECI MINING EXPLOSIVES | BRITISH AMERICAN vs. ZAMBIA SUGAR PLC | BRITISH AMERICAN vs. AIRTEL NETWORKS ZAMBIA |
| CEC AFRICA vs. STANDARD CHARTERED BANK | CEC AFRICA vs. AECI MINING EXPLOSIVES | CEC AFRICA vs. ZAMBIA SUGAR PLC | CEC AFRICA vs. BRITISH AMERICAN TOBACCO ZAMBIA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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