Correlation Between British American and LendingTree
Can any of the company-specific risk be diversified away by investing in both British American and LendingTree 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 LendingTree 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 LendingTree, you can compare the effects of market volatilities on British American and LendingTree 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 LendingTree. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and LendingTree.
Diversification Opportunities for British American and LendingTree
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and LendingTree is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and LendingTree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LendingTree 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 LendingTree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LendingTree has no effect on the direction of British American i.e., British American and LendingTree go up and down completely randomly.
Pair Corralation between British American and LendingTree
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.24 times more return on investment than LendingTree. However, British American Tobacco is 4.15 times less risky than LendingTree. It trades about 0.12 of its potential returns per unit of risk. LendingTree is currently generating about -0.07 per unit of risk. If you would invest 3,341 in British American Tobacco on September 2, 2024 and sell it today you would earn a total of 254.00 from holding British American Tobacco or generate 7.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. LendingTree
Performance |
| Timeline |
| British American Tobacco |
| LendingTree |
British American and LendingTree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and LendingTree
The main advantage of trading using opposite British American and LendingTree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, LendingTree 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 LendingTree will offset losses from the drop in LendingTree's long position.| British American vs. RETAIL FOOD GROUP | British American vs. CANON MARKETING JP | British American vs. Singapore Reinsurance | British American vs. Fast Retailing Co |
| LendingTree vs. Insurance Australia Group | LendingTree vs. BRIT AMER TOBACCO | LendingTree vs. The Hanover Insurance | LendingTree vs. British American Tobacco |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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