Correlation Between EQUITY GROUP and BRITISH AMERICAN
Can any of the company-specific risk be diversified away by investing in both EQUITY GROUP 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 EQUITY GROUP and BRITISH AMERICAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EQUITY GROUP HOLDINGS and BRITISH AMERICAN TOBACCO, you can compare the effects of market volatilities on EQUITY GROUP 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 EQUITY GROUP with a short position of BRITISH AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of EQUITY GROUP and BRITISH AMERICAN.
Diversification Opportunities for EQUITY GROUP and BRITISH AMERICAN
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EQUITY and BRITISH is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding EQUITY GROUP HOLDINGS 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 EQUITY GROUP 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 EQUITY GROUP HOLDINGS 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 EQUITY GROUP i.e., EQUITY GROUP and BRITISH AMERICAN go up and down completely randomly.
Pair Corralation between EQUITY GROUP and BRITISH AMERICAN
Assuming the 90 days trading horizon EQUITY GROUP HOLDINGS is expected to under-perform the BRITISH AMERICAN. In addition to that, EQUITY GROUP is 2.42 times more volatile than BRITISH AMERICAN TOBACCO. It trades about -0.16 of its total potential returns per unit of risk. BRITISH AMERICAN TOBACCO is currently generating about 0.0 per unit of volatility. If you would invest 35,000 in BRITISH AMERICAN TOBACCO on September 4, 2024 and sell it today you would lose (25.00) from holding BRITISH AMERICAN TOBACCO or give up 0.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EQUITY GROUP HOLDINGS vs. BRITISH AMERICAN TOBACCO
Performance |
| Timeline |
| EQUITY GROUP HOLDINGS |
| BRITISH AMERICAN TOBACCO |
EQUITY GROUP and BRITISH AMERICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EQUITY GROUP and BRITISH AMERICAN
The main advantage of trading using opposite EQUITY GROUP and BRITISH AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQUITY GROUP 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.| EQUITY GROUP vs. HOME AFRIKA LTD | EQUITY GROUP vs. CIC INSURANCE GROUP | EQUITY GROUP vs. HOMEBOYZ ENTERTAINMENT PLC | EQUITY GROUP vs. CARBACID INVESTMENTS LTD |
| BRITISH AMERICAN vs. HOMEBOYZ ENTERTAINMENT PLC | BRITISH AMERICAN vs. CENTUM INVESTMENT PANY | BRITISH AMERICAN vs. CIC INSURANCE GROUP | BRITISH AMERICAN vs. EAST AFRICAN BREWERIES |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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