Correlation Between GOODYEAR T and British American
Can any of the company-specific risk be diversified away by investing in both GOODYEAR T 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 GOODYEAR T and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GOODYEAR T RUBBER and British American Tobacco, you can compare the effects of market volatilities on GOODYEAR T 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 GOODYEAR T with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of GOODYEAR T and British American.
Diversification Opportunities for GOODYEAR T and British American
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GOODYEAR and British is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER 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 GOODYEAR T 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 GOODYEAR T RUBBER 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 GOODYEAR T i.e., GOODYEAR T and British American go up and down completely randomly.
Pair Corralation between GOODYEAR T and British American
Assuming the 90 days trading horizon GOODYEAR T RUBBER is expected to under-perform the British American. In addition to that, GOODYEAR T is 1.92 times more volatile than British American Tobacco. It trades about -0.04 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.07 per unit of volatility. If you would invest 2,648 in British American Tobacco on August 26, 2024 and sell it today you would earn a total of 872.00 from holding British American Tobacco or generate 32.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GOODYEAR T RUBBER vs. British American Tobacco
Performance |
| Timeline |
| GOODYEAR T RUBBER |
| British American Tobacco |
GOODYEAR T and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GOODYEAR T and British American
The main advantage of trading using opposite GOODYEAR T and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T 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.The idea behind GOODYEAR T RUBBER and British American Tobacco pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| British American vs. The Yokohama Rubber | British American vs. Magnachip Semiconductor | British American vs. Goodyear Tire Rubber | British American vs. GOODYEAR T RUBBER |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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