Correlation Between DIAMOND TRUST and BRITISH AMERICAN
Can any of the company-specific risk be diversified away by investing in both DIAMOND TRUST 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 DIAMOND TRUST and BRITISH AMERICAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DIAMOND TRUST BANK and BRITISH AMERICAN TOBACCO, you can compare the effects of market volatilities on DIAMOND TRUST 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 DIAMOND TRUST with a short position of BRITISH AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIAMOND TRUST and BRITISH AMERICAN.
Diversification Opportunities for DIAMOND TRUST and BRITISH AMERICAN
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DIAMOND and BRITISH is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding DIAMOND TRUST BANK 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 DIAMOND TRUST 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 DIAMOND TRUST BANK 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 DIAMOND TRUST i.e., DIAMOND TRUST and BRITISH AMERICAN go up and down completely randomly.
Pair Corralation between DIAMOND TRUST and BRITISH AMERICAN
Assuming the 90 days trading horizon DIAMOND TRUST BANK is expected to generate 0.83 times more return on investment than BRITISH AMERICAN. However, DIAMOND TRUST BANK is 1.21 times less risky than BRITISH AMERICAN. It trades about 0.05 of its potential returns per unit of risk. BRITISH AMERICAN TOBACCO is currently generating about -0.08 per unit of risk. If you would invest 5,000 in DIAMOND TRUST BANK on September 3, 2024 and sell it today you would earn a total of 350.00 from holding DIAMOND TRUST BANK or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DIAMOND TRUST BANK vs. BRITISH AMERICAN TOBACCO
Performance |
| Timeline |
| DIAMOND TRUST BANK |
| BRITISH AMERICAN TOBACCO |
DIAMOND TRUST and BRITISH AMERICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIAMOND TRUST and BRITISH AMERICAN
The main advantage of trading using opposite DIAMOND TRUST and BRITISH AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIAMOND TRUST 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.| DIAMOND TRUST vs. KENYA RE INSURANCE PORATION | DIAMOND TRUST vs. CIC INSURANCE GROUP | DIAMOND TRUST vs. HOMEBOYZ ENTERTAINMENT PLC | DIAMOND TRUST vs. CARBACID INVESTMENTS LTD |
| BRITISH AMERICAN vs. TOTALENERGIES MARKETING KENYA | BRITISH AMERICAN vs. CIC INSURANCE GROUP | BRITISH AMERICAN vs. HOMEBOYZ ENTERTAINMENT PLC | BRITISH AMERICAN vs. HOME AFRIKA LTD |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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