Correlation Between FIRST MUTUAL and BRITISH AMERICAN
Can any of the company-specific risk be diversified away by investing in both FIRST MUTUAL 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 FIRST MUTUAL and BRITISH AMERICAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIRST MUTUAL PROPERTIES and BRITISH AMERICAN TOBACCO, you can compare the effects of market volatilities on FIRST MUTUAL 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 FIRST MUTUAL with a short position of BRITISH AMERICAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST MUTUAL and BRITISH AMERICAN.
Diversification Opportunities for FIRST MUTUAL and BRITISH AMERICAN
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FIRST and BRITISH is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding FIRST MUTUAL PROPERTIES 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 FIRST MUTUAL 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 FIRST MUTUAL PROPERTIES 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 FIRST MUTUAL i.e., FIRST MUTUAL and BRITISH AMERICAN go up and down completely randomly.
Pair Corralation between FIRST MUTUAL and BRITISH AMERICAN
Assuming the 90 days trading horizon FIRST MUTUAL PROPERTIES is expected to generate 0.75 times more return on investment than BRITISH AMERICAN. However, FIRST MUTUAL PROPERTIES is 1.34 times less risky than BRITISH AMERICAN. It trades about 0.13 of its potential returns per unit of risk. BRITISH AMERICAN TOBACCO is currently generating about -0.02 per unit of risk. If you would invest 7,500 in FIRST MUTUAL PROPERTIES on November 6, 2024 and sell it today you would earn a total of 2,788 from holding FIRST MUTUAL PROPERTIES or generate 37.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FIRST MUTUAL PROPERTIES vs. BRITISH AMERICAN TOBACCO
Performance |
| Timeline |
| FIRST MUTUAL PROPERTIES |
| BRITISH AMERICAN TOBACCO |
FIRST MUTUAL and BRITISH AMERICAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIRST MUTUAL and BRITISH AMERICAN
The main advantage of trading using opposite FIRST MUTUAL and BRITISH AMERICAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST MUTUAL 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.| FIRST MUTUAL vs. FIRST MUTUAL HOLDINGS | FIRST MUTUAL vs. STAR AFRICA PORATION | FIRST MUTUAL vs. CAFCA LIMITED | FIRST MUTUAL vs. AFRICAN DISTILLERS LIMITED |
| BRITISH AMERICAN vs. STAR AFRICA PORATION | BRITISH AMERICAN vs. CAFCA LIMITED | BRITISH AMERICAN vs. FIRST MUTUAL PROPERTIES | BRITISH AMERICAN vs. AFRICAN DISTILLERS LIMITED |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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