Correlation Between British Amer and General Mills
Can any of the company-specific risk be diversified away by investing in both British Amer and General Mills 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 General Mills 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 General Mills, you can compare the effects of market volatilities on British Amer and General Mills 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 General Mills. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and General Mills.
Diversification Opportunities for British Amer and General Mills
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and General is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of British Amer i.e., British Amer and General Mills go up and down completely randomly.
Pair Corralation between British Amer and General Mills
Considering the 90-day investment horizon British American Tobacco is expected to generate 0.91 times more return on investment than General Mills. However, British American Tobacco is 1.1 times less risky than General Mills. It trades about 0.11 of its potential returns per unit of risk. General Mills is currently generating about -0.2 per unit of risk. If you would invest 3,572 in British American Tobacco on October 31, 2024 and sell it today you would earn a total of 354.00 from holding British American Tobacco or generate 9.91% 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. General Mills
Performance |
Timeline |
British American Tobacco |
General Mills |
British Amer and General Mills Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with British Amer and General Mills
The main advantage of trading using opposite British Amer and General Mills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, General Mills 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 General Mills will offset losses from the drop in General Mills' long position.British Amer vs. Turning Point Brands | British Amer vs. Green Globe International | British Amer vs. Imperial Brands PLC | British Amer vs. Kaival Brands Innovations |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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