Correlation Between British American and POLARX
Can any of the company-specific risk be diversified away by investing in both British American and POLARX 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 POLARX 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 POLARX LTD, you can compare the effects of market volatilities on British American and POLARX 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 POLARX. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and POLARX.
Diversification Opportunities for British American and POLARX
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between British and POLARX is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and POLARX LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POLARX LTD 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 POLARX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POLARX LTD has no effect on the direction of British American i.e., British American and POLARX go up and down completely randomly.
Pair Corralation between British American and POLARX
Assuming the 90 days trading horizon British American is expected to generate 68.37 times less return on investment than POLARX. But when comparing it to its historical volatility, British American Tobacco is 30.69 times less risky than POLARX. It trades about 0.03 of its potential returns per unit of risk. POLARX LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.25 in POLARX LTD on October 13, 2024 and sell it today you would lose (1.20) from holding POLARX LTD or give up 96.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. POLARX LTD
Performance |
| Timeline |
| British American Tobacco |
| POLARX LTD |
British American and POLARX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and POLARX
The main advantage of trading using opposite British American and POLARX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, POLARX 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 POLARX will offset losses from the drop in POLARX'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 |
| POLARX vs. GRUPO CARSO A1 | POLARX vs. Daito Trust Construction | POLARX vs. Tokyu Construction Co | POLARX vs. Cars 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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