Correlation Between British American and Reinsurance Group
Can any of the company-specific risk be diversified away by investing in both British American and Reinsurance Group 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 Reinsurance Group 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 Reinsurance Group of, you can compare the effects of market volatilities on British American and Reinsurance Group 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 Reinsurance Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Reinsurance Group.
Diversification Opportunities for British American and Reinsurance Group
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and Reinsurance is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group 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 Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of British American i.e., British American and Reinsurance Group go up and down completely randomly.
Pair Corralation between British American and Reinsurance Group
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.67 times more return on investment than Reinsurance Group. However, British American Tobacco is 1.5 times less risky than Reinsurance Group. It trades about 0.32 of its potential returns per unit of risk. Reinsurance Group of is currently generating about 0.13 per unit of risk. If you would invest 3,574 in British American Tobacco on November 7, 2024 and sell it today you would earn a total of 298.00 from holding British American Tobacco or generate 8.34% 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. Reinsurance Group of
Performance |
| Timeline |
| British American Tobacco |
| Reinsurance Group |
British American and Reinsurance Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Reinsurance Group
The main advantage of trading using opposite British American and Reinsurance Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Reinsurance Group 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 Reinsurance Group will offset losses from the drop in Reinsurance Group's long position.| British American vs. MPH Health Care | British American vs. National Health Investors | British American vs. Siemens Healthineers AG | British American vs. PREMIER FOODS |
| Reinsurance Group vs. ALTAIR RES INC | Reinsurance Group vs. MCEWEN MINING INC | Reinsurance Group vs. STGEORGE MINING LTD | Reinsurance Group vs. Harmony Gold Mining |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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