Correlation Between British American and Global Ship
Can any of the company-specific risk be diversified away by investing in both British American and Global Ship 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 Global Ship 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 Global Ship Lease, you can compare the effects of market volatilities on British American and Global Ship 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 Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Global Ship.
Diversification Opportunities for British American and Global Ship
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and Global is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of British American i.e., British American and Global Ship go up and down completely randomly.
Pair Corralation between British American and Global Ship
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.57 times more return on investment than Global Ship. However, British American Tobacco is 1.77 times less risky than Global Ship. It trades about 0.11 of its potential returns per unit of risk. Global Ship Lease is currently generating about -0.07 per unit of risk. If you would invest 3,356 in British American Tobacco on September 3, 2024 and sell it today you would earn a total of 239.00 from holding British American Tobacco or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Global Ship Lease
Performance |
| Timeline |
| British American Tobacco |
| Global Ship Lease |
British American and Global Ship Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Global Ship
The main advantage of trading using opposite British American and Global Ship positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Global Ship 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 Global Ship will offset losses from the drop in Global Ship's long position.| British American vs. British American Tobacco | British American vs. Japan Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Imperial Brands PLC |
| Global Ship vs. BW LPG Limited | Global Ship vs. Wilh Wilhelmsen Holding | Global Ship vs. Superior Plus Corp | Global Ship 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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