Correlation Between British American and GOLD ROAD
Can any of the company-specific risk be diversified away by investing in both British American and GOLD ROAD 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 GOLD ROAD 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 GOLD ROAD RES, you can compare the effects of market volatilities on British American and GOLD ROAD 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 GOLD ROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and GOLD ROAD.
Diversification Opportunities for British American and GOLD ROAD
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and GOLD is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of British American i.e., British American and GOLD ROAD go up and down completely randomly.
Pair Corralation between British American and GOLD ROAD
Assuming the 90 days trading horizon British American is expected to generate 25.58 times less return on investment than GOLD ROAD. But when comparing it to its historical volatility, British American Tobacco is 3.06 times less risky than GOLD ROAD. It trades about 0.04 of its potential returns per unit of risk. GOLD ROAD RES is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 113.00 in GOLD ROAD RES on October 28, 2024 and sell it today you would earn a total of 35.00 from holding GOLD ROAD RES or generate 30.97% 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. GOLD ROAD RES
Performance |
| Timeline |
| British American Tobacco |
| GOLD ROAD RES |
British American and GOLD ROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and GOLD ROAD
The main advantage of trading using opposite British American and GOLD ROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, GOLD ROAD 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 GOLD ROAD will offset losses from the drop in GOLD ROAD's long position.| British American vs. Philip Morris International | British American vs. Philip Morris International | British American vs. British American Tobacco | British American vs. Altria Group |
| GOLD ROAD vs. ZURICH INSURANCE GROUP | GOLD ROAD vs. EPSILON HEALTHCARE LTD | GOLD ROAD vs. Japan Post Insurance | GOLD ROAD vs. Cardinal Health |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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