Correlation Between British Amer and MultiChoice
Can any of the company-specific risk be diversified away by investing in both British Amer and MultiChoice 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 MultiChoice 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 MultiChoice Group, you can compare the effects of market volatilities on British Amer and MultiChoice 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 MultiChoice. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and MultiChoice.
Diversification Opportunities for British Amer and MultiChoice
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between British and MultiChoice is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and MultiChoice Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MultiChoice Group 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 MultiChoice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MultiChoice Group has no effect on the direction of British Amer i.e., British Amer and MultiChoice go up and down completely randomly.
Pair Corralation between British Amer and MultiChoice
Assuming the 90 days trading horizon British Amer is expected to generate 1.49 times less return on investment than MultiChoice. But when comparing it to its historical volatility, British American Tobacco is 1.86 times less risky than MultiChoice. It trades about 0.11 of its potential returns per unit of risk. MultiChoice Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 693,700 in MultiChoice Group on September 3, 2024 and sell it today you would earn a total of 379,300 from holding MultiChoice Group or generate 54.68% 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. MultiChoice Group
Performance |
| Timeline |
| British American Tobacco |
| MultiChoice Group |
British Amer and MultiChoice Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and MultiChoice
The main advantage of trading using opposite British Amer and MultiChoice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, MultiChoice 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 MultiChoice will offset losses from the drop in MultiChoice'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 |
| MultiChoice vs. eMedia Holdings Limited | MultiChoice vs. Sasol Ltd Bee | MultiChoice vs. Centaur Bci Balanced | MultiChoice vs. Sabvest Capital |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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