Correlation Between De Grey and British American
Can any of the company-specific risk be diversified away by investing in both De Grey and British American 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 De Grey and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between De Grey Mining and British American Tobacco, you can compare the effects of market volatilities on De Grey and British American 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 De Grey with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Grey and British American.
Diversification Opportunities for De Grey and British American
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DGD and British is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and De Grey 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 De Grey Mining are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of De Grey i.e., De Grey and British American go up and down completely randomly.
Pair Corralation between De Grey and British American
Assuming the 90 days trading horizon De Grey Mining is expected to generate 4.07 times more return on investment than British American. However, De Grey is 4.07 times more volatile than British American Tobacco. It trades about 0.13 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest 70.00 in De Grey Mining on October 25, 2024 and sell it today you would earn a total of 49.00 from holding De Grey Mining or generate 70.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
De Grey Mining vs. British American Tobacco
Performance |
| Timeline |
| De Grey Mining |
| British American Tobacco |
De Grey and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with De Grey and British American
The main advantage of trading using opposite De Grey and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| De Grey vs. VIENNA INSURANCE GR | De Grey vs. Japan Post Insurance | De Grey vs. Safety Insurance Group | De Grey vs. UNIQA INSURANCE GR |
| British American vs. FIREWEED METALS P | British American vs. CARDINAL HEALTH | British American vs. GREENX METALS LTD | British American vs. Cardinal Health |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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