Correlation Between British American and Talanx AG
Can any of the company-specific risk be diversified away by investing in both British American and Talanx AG 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 Talanx AG 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 Talanx AG, you can compare the effects of market volatilities on British American and Talanx AG 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 Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Talanx AG.
Diversification Opportunities for British American and Talanx AG
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Talanx is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of British American i.e., British American and Talanx AG go up and down completely randomly.
Pair Corralation between British American and Talanx AG
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.71 times more return on investment than Talanx AG. However, British American Tobacco is 1.4 times less risky than Talanx AG. It trades about 0.2 of its potential returns per unit of risk. Talanx AG is currently generating about 0.04 per unit of risk. If you would invest 2,767 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 828.00 from holding British American Tobacco or generate 29.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Talanx AG
Performance |
| Timeline |
| British American Tobacco |
| Talanx AG |
British American and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Talanx AG
The main advantage of trading using opposite British American and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.| British American vs. Air Transport Services | British American vs. Corporate Office Properties | British American vs. Columbia Sportswear | British American vs. Ming Le Sports |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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