Correlation Between British American and De Grey
Can any of the company-specific risk be diversified away by investing in both British American and De Grey 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 De Grey 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 De Grey Mining, you can compare the effects of market volatilities on British American and De Grey 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 De Grey. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and De Grey.
Diversification Opportunities for British American and De Grey
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and DGD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and De Grey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Grey Mining 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 De Grey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Grey Mining has no effect on the direction of British American i.e., British American and De Grey go up and down completely randomly.
Pair Corralation between British American and De Grey
Assuming the 90 days trading horizon British American is expected to generate 5.76 times less return on investment than De Grey. But when comparing it to its historical volatility, British American Tobacco is 4.07 times less risky than De Grey. It trades about 0.09 of its potential returns per unit of risk. De Grey Mining is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 70.00 in De Grey Mining on October 25, 2024 and sell it today you would earn a total of 49.00 from holding De Grey Mining or generate 70.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. De Grey Mining
Performance |
| Timeline |
| British American Tobacco |
| De Grey Mining |
British American and De Grey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and De Grey
The main advantage of trading using opposite British American and De Grey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, De Grey 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 De Grey will offset losses from the drop in De Grey's long position.| British American vs. FIREWEED METALS P | British American vs. CARDINAL HEALTH | British American vs. GREENX METALS LTD | British American vs. Cardinal Health |
| De Grey vs. VIENNA INSURANCE GR | De Grey vs. Japan Post Insurance | De Grey vs. Safety Insurance Group | De Grey vs. UNIQA INSURANCE GR |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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