Correlation Between British Amer and Aston Martin
Can any of the company-specific risk be diversified away by investing in both British Amer and Aston Martin 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 Aston Martin 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 Aston Martin Lagonda, you can compare the effects of market volatilities on British Amer and Aston Martin 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 Aston Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Aston Martin.
Diversification Opportunities for British Amer and Aston Martin
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and Aston is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Aston Martin Lagonda in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aston Martin Lagonda 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 Aston Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aston Martin Lagonda has no effect on the direction of British Amer i.e., British Amer and Aston Martin go up and down completely randomly.
Pair Corralation between British Amer and Aston Martin
Considering the 90-day investment horizon British American Tobacco is expected to generate 0.21 times more return on investment than Aston Martin. However, British American Tobacco is 4.71 times less risky than Aston Martin. It trades about 0.15 of its potential returns per unit of risk. Aston Martin Lagonda is currently generating about -0.02 per unit of risk. If you would invest 2,723 in British American Tobacco on November 9, 2024 and sell it today you would earn a total of 1,439 from holding British American Tobacco or generate 52.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
British American Tobacco vs. Aston Martin Lagonda
Performance |
| Timeline |
| British American Tobacco |
| Aston Martin Lagonda |
British Amer and Aston Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Aston Martin
The main advantage of trading using opposite British Amer and Aston Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Aston Martin 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 Aston Martin will offset losses from the drop in Aston Martin's long position.| British Amer vs. Philip Morris International | British Amer vs. Universal | British Amer vs. Imperial Brands PLC | British Amer vs. Altria Group |
| Aston Martin vs. Polestar Automotive Holding | Aston Martin vs. Geely Automobile Holdings | Aston Martin vs. Mercedes Benz Group AG | Aston Martin vs. Porsche Automobile Holding |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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