Correlation Between British American and RLX Technology
Can any of the company-specific risk be diversified away by investing in both British American and RLX Technology 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 RLX Technology 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 RLX Technology, you can compare the effects of market volatilities on British American and RLX Technology 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 RLX Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and RLX Technology.
Diversification Opportunities for British American and RLX Technology
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between British and RLX is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of British American i.e., British American and RLX Technology go up and down completely randomly.
Pair Corralation between British American and RLX Technology
Assuming the 90 days horizon British American Tobacco is expected to generate 0.89 times more return on investment than RLX Technology. However, British American Tobacco is 1.13 times less risky than RLX Technology. It trades about 0.05 of its potential returns per unit of risk. RLX Technology is currently generating about -0.02 per unit of risk. If you would invest 2,925 in British American Tobacco on August 24, 2024 and sell it today you would earn a total of 677.00 from holding British American Tobacco or generate 23.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
British American Tobacco vs. RLX Technology
Performance |
| Timeline |
| British American Tobacco |
| RLX Technology |
British American and RLX Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and RLX Technology
The main advantage of trading using opposite British American and RLX Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, RLX Technology 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 RLX Technology will offset losses from the drop in RLX Technology's long position.| British American vs. Japan Tobacco ADR | British American vs. Imperial Brands PLC | British American vs. RLX Technology | British American vs. British American Tobacco |
| RLX Technology vs. Universal | RLX Technology vs. Imperial Brands PLC | RLX Technology vs. Philip Morris International | RLX Technology vs. Japan Tobacco ADR |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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