Correlation Between British Amer and Brimstone Investment
Can any of the company-specific risk be diversified away by investing in both British Amer and Brimstone Investment 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 Brimstone Investment 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 Brimstone Investment, you can compare the effects of market volatilities on British Amer and Brimstone Investment 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 Brimstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Brimstone Investment.
Diversification Opportunities for British Amer and Brimstone Investment
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Brimstone is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Brimstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brimstone Investment 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 Brimstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brimstone Investment has no effect on the direction of British Amer i.e., British Amer and Brimstone Investment go up and down completely randomly.
Pair Corralation between British Amer and Brimstone Investment
Assuming the 90 days trading horizon British Amer is expected to generate 1.24 times less return on investment than Brimstone Investment. But when comparing it to its historical volatility, British American Tobacco is 2.76 times less risky than Brimstone Investment. It trades about 0.14 of its potential returns per unit of risk. Brimstone Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 46,500 in Brimstone Investment on September 1, 2024 and sell it today you would earn a total of 10,900 from holding Brimstone Investment or generate 23.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Brimstone Investment
Performance |
| Timeline |
| British American Tobacco |
| Brimstone Investment |
British Amer and Brimstone Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Brimstone Investment
The main advantage of trading using opposite British Amer and Brimstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Brimstone Investment 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 Brimstone Investment will offset losses from the drop in Brimstone Investment's long position.| British Amer vs. Standard Bank Group | British Amer vs. Deneb Investments | British Amer vs. Ascendis Health | British Amer vs. Frontier Transport Holdings |
| Brimstone Investment vs. Tiger Brands | Brimstone Investment vs. Avi | Brimstone Investment vs. RCL Foods | Brimstone Investment vs. Oceana |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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