Correlation Between British American and Insulet
Can any of the company-specific risk be diversified away by investing in both British American and Insulet 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 Insulet 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 Insulet, you can compare the effects of market volatilities on British American and Insulet 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 Insulet. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Insulet.
Diversification Opportunities for British American and Insulet
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between British and Insulet is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet 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 Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of British American i.e., British American and Insulet go up and down completely randomly.
Pair Corralation between British American and Insulet
Assuming the 90 days trading horizon British American is expected to generate 36.39 times less return on investment than Insulet. But when comparing it to its historical volatility, British American Tobacco is 2.53 times less risky than Insulet. It trades about 0.0 of its potential returns per unit of risk. Insulet is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 26,190 in Insulet on October 13, 2024 and sell it today you would earn a total of 310.00 from holding Insulet or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
British American Tobacco vs. Insulet
Performance |
| Timeline |
| British American Tobacco |
| Insulet |
British American and Insulet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Insulet
The main advantage of trading using opposite British American and Insulet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Insulet 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 Insulet will offset losses from the drop in Insulet's long position.| British American vs. InPlay Oil Corp | British American vs. PLAY2CHILL SA ZY | British American vs. Playa Hotels Resorts | British American vs. PLAYSTUDIOS A DL 0001 |
| Insulet vs. PURETECH HEALTH PLC | Insulet vs. Planet Fitness | Insulet vs. Japan Tobacco | Insulet vs. ALGOMA STEEL GROUP |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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