Correlation Between British Amer and Blue Label
Can any of the company-specific risk be diversified away by investing in both British Amer and Blue Label 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 Amer and Blue Label 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 Blue Label Telecoms, you can compare the effects of market volatilities on British Amer and Blue Label 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 Amer with a short position of Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Blue Label.
Diversification Opportunities for British Amer and Blue Label
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and Blue is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms and British Amer 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 Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of British Amer i.e., British Amer and Blue Label go up and down completely randomly.
Pair Corralation between British Amer and Blue Label
Assuming the 90 days trading horizon British Amer is expected to generate 1.44 times less return on investment than Blue Label. But when comparing it to its historical volatility, British American Tobacco is 1.65 times less risky than Blue Label. It trades about 0.1 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 37,200 in Blue Label Telecoms on September 3, 2024 and sell it today you would earn a total of 16,000 from holding Blue Label Telecoms or generate 43.01% 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. Blue Label Telecoms
Performance |
| Timeline |
| British American Tobacco |
| Blue Label Telecoms |
British Amer and Blue Label Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Blue Label
The main advantage of trading using opposite British Amer and Blue Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Blue Label 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 Blue Label will offset losses from the drop in Blue Label's long position.| British Amer vs. Sasol Ltd Bee | British Amer vs. Centaur Bci Balanced | British Amer vs. Growthpoint Properties | British Amer vs. Coronation Global Equity |
| Blue Label vs. Brimstone Investment | Blue Label vs. Master Drilling Group | Blue Label vs. Astral Foods | Blue Label 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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