Correlation Between British Amer and American Aires
Can any of the company-specific risk be diversified away by investing in both British Amer and American Aires 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 American Aires 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 American Aires, you can compare the effects of market volatilities on British Amer and American Aires 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 American Aires. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and American Aires.
Diversification Opportunities for British Amer and American Aires
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between British and American is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and American Aires in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Aires 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 American Aires. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Aires has no effect on the direction of British Amer i.e., British Amer and American Aires go up and down completely randomly.
Pair Corralation between British Amer and American Aires
Considering the 90-day investment horizon British American Tobacco is expected to generate 0.12 times more return on investment than American Aires. However, British American Tobacco is 8.57 times less risky than American Aires. It trades about 0.16 of its potential returns per unit of risk. American Aires is currently generating about -0.03 per unit of risk. If you would invest 3,421 in British American Tobacco on October 26, 2024 and sell it today you would earn a total of 284.00 from holding British American Tobacco or generate 8.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.33% |
| Values | Daily Returns |
British American Tobacco vs. American Aires
Performance |
| Timeline |
| British American Tobacco |
| American Aires |
British Amer and American Aires Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and American Aires
The main advantage of trading using opposite British Amer and American Aires positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, American Aires 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 American Aires will offset losses from the drop in American Aires' long position.| British Amer vs. Philip Morris International | British Amer vs. Universal | British Amer vs. Imperial Brands PLC | British Amer vs. Altria Group |
| American Aires vs. alpha En | American Aires vs. Alps Electric Co | American Aires vs. Bitmine Immersion Technologies | American Aires vs. AT S Austria |
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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