Correlation Between British Amer and JSE
Can any of the company-specific risk be diversified away by investing in both British Amer and JSE 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 JSE 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 JSE Limited, you can compare the effects of market volatilities on British Amer and JSE 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 JSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and JSE.
Diversification Opportunities for British Amer and JSE
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and JSE is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and JSE Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JSE Limited 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 JSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JSE Limited has no effect on the direction of British Amer i.e., British Amer and JSE go up and down completely randomly.
Pair Corralation between British Amer and JSE
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.83 times more return on investment than JSE. However, British American Tobacco is 1.2 times less risky than JSE. It trades about 0.47 of its potential returns per unit of risk. JSE Limited is currently generating about -0.2 per unit of risk. If you would invest 6,123,100 in British American Tobacco on August 30, 2024 and sell it today you would earn a total of 708,900 from holding British American Tobacco or generate 11.58% 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. JSE Limited
Performance |
| Timeline |
| British American Tobacco |
| JSE Limited |
British Amer and JSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and JSE
The main advantage of trading using opposite British Amer and JSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, JSE 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 JSE will offset losses from the drop in JSE's long position.| British Amer vs. HomeChoice Investments | British Amer vs. Harmony Gold Mining | British Amer vs. Astoria Investments | British Amer vs. CA Sales Holdings |
| JSE vs. British American Tobacco | JSE vs. Anglo American PLC | JSE vs. Anglo American Platinum | JSE vs. ABSA Bank Limited |
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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