Correlation Between E Media and British Amer
Can any of the company-specific risk be diversified away by investing in both E Media and British Amer 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 E Media and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Media Holdings and British American Tobacco, you can compare the effects of market volatilities on E Media and British Amer 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 E Media with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and British Amer.
Diversification Opportunities for E Media and British Amer
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between EMH and British is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding E Media 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 E Media 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 E Media Holdings are associated (or correlated) with British Amer. 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 E Media i.e., E Media and British Amer go up and down completely randomly.
Pair Corralation between E Media and British Amer
Assuming the 90 days trading horizon E Media is expected to generate 39.13 times less return on investment than British Amer. But when comparing it to its historical volatility, E Media Holdings is 7.14 times less risky than British Amer. It trades about 0.09 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 6,100,400 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 730,600 from holding British American Tobacco or generate 11.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
E Media Holdings vs. British American Tobacco
Performance |
| Timeline |
| E Media Holdings |
| British American Tobacco |
E Media and British Amer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Media and British Amer
The main advantage of trading using opposite E Media and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Media position performs unexpectedly, British Amer 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 Amer will offset losses from the drop in British Amer's long position.| E Media vs. MultiChoice Group | E Media vs. Sasol Ltd Bee | E Media vs. Growthpoint Properties | E Media vs. AfricaRhodium ETF |
| British Amer vs. Standard Bank Group | British Amer vs. Deneb Investments | British Amer vs. Ascendis Health | British Amer vs. Frontier Transport Holdings |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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