Correlation Between Banco BTG and British American
Can any of the company-specific risk be diversified away by investing in both Banco BTG and British American 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 Banco BTG and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco BTG Pactual and British American Tobacco, you can compare the effects of market volatilities on Banco BTG and British American 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 Banco BTG with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco BTG and British American.
Diversification Opportunities for Banco BTG and British American
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Banco and British is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Banco BTG Pactual and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Banco BTG 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 Banco BTG Pactual are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Banco BTG i.e., Banco BTG and British American go up and down completely randomly.
Pair Corralation between Banco BTG and British American
Assuming the 90 days trading horizon Banco BTG Pactual is expected to under-perform the British American. In addition to that, Banco BTG is 2.46 times more volatile than British American Tobacco. It trades about -0.15 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.64 per unit of volatility. If you would invest 4,066 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 501.00 from holding British American Tobacco or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco BTG Pactual vs. British American Tobacco
Performance |
| Timeline |
| Banco BTG Pactual |
| British American Tobacco |
Banco BTG and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco BTG and British American
The main advantage of trading using opposite Banco BTG and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco BTG position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.The idea behind Banco BTG Pactual and British American Tobacco 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.| British American vs. Fras le SA | British American vs. Energisa SA | British American vs. Clave Indices De | British American vs. BTG Pactual Logstica |
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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