Correlation Between Gold Fields and British American
Can any of the company-specific risk be diversified away by investing in both Gold Fields 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 Gold Fields and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Limited and British American Tobacco, you can compare the effects of market volatilities on Gold Fields 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 Gold Fields with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and British American.
Diversification Opportunities for Gold Fields and British American
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gold and British is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Limited 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 Gold Fields 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 Gold Fields Limited 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 Gold Fields i.e., Gold Fields and British American go up and down completely randomly.
Pair Corralation between Gold Fields and British American
Assuming the 90 days trading horizon Gold Fields Limited is expected to generate 1.92 times more return on investment than British American. However, Gold Fields is 1.92 times more volatile than British American Tobacco. It trades about 0.05 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.04 per unit of risk. If you would invest 2,694 in Gold Fields Limited on September 14, 2024 and sell it today you would earn a total of 1,810 from holding Gold Fields Limited or generate 67.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.79% |
| Values | Daily Returns |
Gold Fields Limited vs. British American Tobacco
Performance |
| Timeline |
| Gold Fields Limited |
| British American Tobacco |
Gold Fields and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and British American
The main advantage of trading using opposite Gold Fields and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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.| Gold Fields vs. British American Tobacco | Gold Fields vs. Mitsubishi UFJ Financial | Gold Fields vs. Bread Financial Holdings | Gold Fields vs. Ameriprise Financial |
| British American vs. Nordon Indstrias Metalrgicas | British American vs. T Mobile | British American vs. Take Two Interactive Software | British American vs. Unity Software |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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