Correlation Between British Amer and Real Good

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Can any of the company-specific risk be diversified away by investing in both British Amer and Real Good 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 Real Good 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 Real Good Food, you can compare the effects of market volatilities on British Amer and Real Good 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 Real Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Real Good.

Diversification Opportunities for British Amer and Real Good

BritishRealDiversified AwayBritishRealDiversified Away100%
-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between British and Real is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Real Good Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Good Food 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 Real Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Good Food has no effect on the direction of British Amer i.e., British Amer and Real Good go up and down completely randomly.

Pair Corralation between British Amer and Real Good

If you would invest  3,791  in British American Tobacco on November 25, 2024 and sell it today you would lose (6.00) from holding British American Tobacco or give up 0.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.76%
ValuesDaily Returns

British American Tobacco  vs.  Real Good Food

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -80-60-40-20020
JavaScript chart by amCharts 3.21.15BTI RGF
       Timeline  
British American Tobacco 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3536373839404142
Real Good Food 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly conflicting technical and fundamental indicators, Real Good reported solid returns over the last few months and may actually be approaching a breakup point.

British Amer and Real Good Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.52-3.39-2.25-1.120.01.172.363.564.75 0.050.100.15
JavaScript chart by amCharts 3.21.15BTI RGF
       Returns  

Pair Trading with British Amer and Real Good

The main advantage of trading using opposite British Amer and Real Good positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Real Good 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 Real Good will offset losses from the drop in Real Good's long position.
The idea behind British American Tobacco and Real Good Food pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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