Correlation Between British American and KINGDEE INTL
Can any of the company-specific risk be diversified away by investing in both British American and KINGDEE INTL 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 KINGDEE INTL 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 KINGDEE INTL SOFTWA, you can compare the effects of market volatilities on British American and KINGDEE INTL 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 KINGDEE INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and KINGDEE INTL.
Diversification Opportunities for British American and KINGDEE INTL
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and KINGDEE is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and KINGDEE INTL SOFTWA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGDEE INTL SOFTWA 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 KINGDEE INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGDEE INTL SOFTWA has no effect on the direction of British American i.e., British American and KINGDEE INTL go up and down completely randomly.
Pair Corralation between British American and KINGDEE INTL
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.18 times more return on investment than KINGDEE INTL. However, British American Tobacco is 5.52 times less risky than KINGDEE INTL. It trades about 0.73 of its potential returns per unit of risk. KINGDEE INTL SOFTWA is currently generating about 0.12 per unit of risk. If you would invest 3,181 in British American Tobacco on August 31, 2024 and sell it today you would earn a total of 392.00 from holding British American Tobacco or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. KINGDEE INTL SOFTWA
Performance |
| Timeline |
| British American Tobacco |
| KINGDEE INTL SOFTWA |
British American and KINGDEE INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and KINGDEE INTL
The main advantage of trading using opposite British American and KINGDEE INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, KINGDEE INTL 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 KINGDEE INTL will offset losses from the drop in KINGDEE INTL's long position.The idea behind British American Tobacco and KINGDEE INTL SOFTWA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| KINGDEE INTL vs. Hemisphere Energy Corp | KINGDEE INTL vs. SBA Communications Corp | KINGDEE INTL vs. Sporttotal AG | KINGDEE INTL vs. Iridium Communications |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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