Correlation Between British American and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both British American and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO , you can compare the effects of market volatilities on British American and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and IMPERIAL TOBACCO.
Diversification Opportunities for British American and IMPERIAL TOBACCO
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between British and IMPERIAL is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of British American i.e., British American and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between British American and IMPERIAL TOBACCO
Assuming the 90 days trading horizon British American Tobacco is expected to generate 1.24 times more return on investment than IMPERIAL TOBACCO. However, British American is 1.24 times more volatile than IMPERIAL TOBACCO . It trades about 0.15 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.05 per unit of risk. If you would invest 3,517 in British American Tobacco on October 7, 2024 and sell it today you would earn a total of 68.00 from holding British American Tobacco or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| British American Tobacco |
| IMPERIAL TOBACCO |
British American and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and IMPERIAL TOBACCO
The main advantage of trading using opposite British American and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| British American vs. VARIOUS EATERIES LS | British American vs. Easy Software AG | British American vs. Scandinavian Tobacco Group | British American vs. Japan Tobacco |
| IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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