Correlation Between British American and Altria
Can any of the company-specific risk be diversified away by investing in both British American and Altria 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 Altria 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 Altria Group, you can compare the effects of market volatilities on British American and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Altria.
Diversification Opportunities for British American and Altria
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and Altria is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of British American i.e., British American and Altria go up and down completely randomly.
Pair Corralation between British American and Altria
Assuming the 90 days horizon British American is expected to generate 4.14 times less return on investment than Altria. But when comparing it to its historical volatility, British American Tobacco is 1.04 times less risky than Altria. It trades about 0.02 of its potential returns per unit of risk. Altria Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,688 in Altria Group on August 30, 2024 and sell it today you would earn a total of 1,792 from holding Altria Group or generate 48.59% 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. Altria Group
Performance |
| Timeline |
| British American Tobacco |
| Altria Group |
British American and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Altria
The main advantage of trading using opposite British American and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.| British American vs. British American Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Superior Plus Corp | British American vs. NMI Holdings |
| Altria vs. British American Tobacco | Altria vs. JAPAN TOBACCO UNSPADR12 | Altria vs. Superior Plus Corp | Altria vs. NMI 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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