Correlation Between British Amer and Murata Manufacturing
Can any of the company-specific risk be diversified away by investing in both British Amer and Murata Manufacturing 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 Murata Manufacturing 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 Murata Manufacturing Co, you can compare the effects of market volatilities on British Amer and Murata Manufacturing 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 Murata Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Murata Manufacturing.
Diversification Opportunities for British Amer and Murata Manufacturing
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between British and Murata is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Murata Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murata Manufacturing 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 Murata Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murata Manufacturing has no effect on the direction of British Amer i.e., British Amer and Murata Manufacturing go up and down completely randomly.
Pair Corralation between British Amer and Murata Manufacturing
Considering the 90-day investment horizon British American Tobacco is expected to generate 0.2 times more return on investment than Murata Manufacturing. However, British American Tobacco is 5.08 times less risky than Murata Manufacturing. It trades about 0.26 of its potential returns per unit of risk. Murata Manufacturing Co is currently generating about 0.03 per unit of risk. If you would invest 3,697 in British American Tobacco on November 5, 2024 and sell it today you would earn a total of 267.00 from holding British American Tobacco or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Murata Manufacturing Co
Performance |
| Timeline |
| British American Tobacco |
| Murata Manufacturing |
British Amer and Murata Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British Amer and Murata Manufacturing
The main advantage of trading using opposite British Amer and Murata Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Murata Manufacturing 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 Murata Manufacturing will offset losses from the drop in Murata Manufacturing's long position.| British Amer vs. Philip Morris International | British Amer vs. Universal | British Amer vs. Imperial Brands PLC | British Amer vs. Altria Group |
| Murata Manufacturing vs. OMRON Corp ADR | Murata Manufacturing vs. LGL Group | Murata Manufacturing vs. Data IO | Murata Manufacturing vs. Sanmina |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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