Correlation Between British American and BII Railway
Can any of the company-specific risk be diversified away by investing in both British American and BII Railway 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 BII Railway 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 BII Railway Transportation, you can compare the effects of market volatilities on British American and BII Railway 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 BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and BII Railway.
Diversification Opportunities for British American and BII Railway
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and BII is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor 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 BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of British American i.e., British American and BII Railway go up and down completely randomly.
Pair Corralation between British American and BII Railway
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.43 times more return on investment than BII Railway. However, British American Tobacco is 2.34 times less risky than BII Railway. It trades about 0.72 of its potential returns per unit of risk. BII Railway Transportation is currently generating about -0.14 per unit of risk. If you would invest 3,208 in British American Tobacco on August 30, 2024 and sell it today you would earn a total of 393.00 from holding British American Tobacco or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
British American Tobacco vs. BII Railway Transportation
Performance |
| Timeline |
| British American Tobacco |
| BII Railway Transpor |
British American and BII Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and BII Railway
The main advantage of trading using opposite British American and BII Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, BII Railway 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 BII Railway will offset losses from the drop in BII Railway's long position.| British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Superior Plus Corp | British American vs. NMI Holdings | British American vs. SIVERS SEMICONDUCTORS AB |
| BII Railway vs. Accenture plc | BII Railway vs. International Business Machines | BII Railway vs. Superior Plus Corp | BII Railway vs. SIVERS SEMICONDUCTORS AB |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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