Correlation Between British Amer and Dis Chem
Can any of the company-specific risk be diversified away by investing in both British Amer and Dis Chem 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 Dis Chem 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 Dis Chem Pharmacies, you can compare the effects of market volatilities on British Amer and Dis Chem 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 Dis Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Dis Chem.
Diversification Opportunities for British Amer and Dis Chem
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and Dis is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Dis Chem Pharmacies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dis Chem Pharmacies 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 Dis Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dis Chem Pharmacies has no effect on the direction of British Amer i.e., British Amer and Dis Chem go up and down completely randomly.
Pair Corralation between British Amer and Dis Chem
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.86 times more return on investment than Dis Chem. However, British American Tobacco is 1.17 times less risky than Dis Chem. It trades about 0.44 of its potential returns per unit of risk. Dis Chem Pharmacies is currently generating about 0.06 per unit of risk. If you would invest 6,154,700 in British American Tobacco on August 28, 2024 and sell it today you would earn a total of 609,600 from holding British American Tobacco or generate 9.9% 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. Dis Chem Pharmacies
Performance |
| Timeline |
| British American Tobacco |
| Dis Chem Pharmacies |
British Amer and Dis Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Dis Chem
The main advantage of trading using opposite British Amer and Dis Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Dis Chem 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 Dis Chem will offset losses from the drop in Dis Chem's long position.| British Amer vs. Sasol Ltd Bee | British Amer vs. Growthpoint Properties | British Amer vs. AfricaRhodium ETF | British Amer vs. CoreShares Preference Share |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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