Correlation Between British Amer and Wesizwe
Can any of the company-specific risk be diversified away by investing in both British Amer and Wesizwe 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 Wesizwe 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 Wesizwe, you can compare the effects of market volatilities on British Amer and Wesizwe 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 Wesizwe. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Wesizwe.
Diversification Opportunities for British Amer and Wesizwe
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and Wesizwe is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Wesizwe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesizwe 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 Wesizwe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesizwe has no effect on the direction of British Amer i.e., British Amer and Wesizwe go up and down completely randomly.
Pair Corralation between British Amer and Wesizwe
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.27 times more return on investment than Wesizwe. However, British American Tobacco is 3.73 times less risky than Wesizwe. It trades about 0.14 of its potential returns per unit of risk. Wesizwe is currently generating about 0.0 per unit of risk. If you would invest 5,498,911 in British American Tobacco on September 2, 2024 and sell it today you would earn a total of 1,332,089 from holding British American Tobacco or generate 24.22% 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. Wesizwe
Performance |
| Timeline |
| British American Tobacco |
| Wesizwe |
British Amer and Wesizwe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Wesizwe
The main advantage of trading using opposite British Amer and Wesizwe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Wesizwe 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 Wesizwe will offset losses from the drop in Wesizwe's long position.| British Amer vs. Centaur Bci Balanced | British Amer vs. Sabvest Capital | British Amer vs. AfricaRhodium ETF | British Amer vs. Indexco 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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