Correlation Between Imperial Brands and Apax Global
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Apax Global 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 Imperial Brands and Apax Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Brands PLC and Apax Global Alpha, you can compare the effects of market volatilities on Imperial Brands and Apax Global 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 Imperial Brands with a short position of Apax Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Apax Global.
Diversification Opportunities for Imperial Brands and Apax Global
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Imperial and Apax is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Apax Global Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apax Global Alpha and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with Apax Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apax Global Alpha has no effect on the direction of Imperial Brands i.e., Imperial Brands and Apax Global go up and down completely randomly.
Pair Corralation between Imperial Brands and Apax Global
Assuming the 90 days trading horizon Imperial Brands PLC is expected to generate 0.73 times more return on investment than Apax Global. However, Imperial Brands PLC is 1.37 times less risky than Apax Global. It trades about 0.09 of its potential returns per unit of risk. Apax Global Alpha is currently generating about -0.01 per unit of risk. If you would invest 175,645 in Imperial Brands PLC on November 2, 2024 and sell it today you would earn a total of 93,955 from holding Imperial Brands PLC or generate 53.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Brands PLC vs. Apax Global Alpha
Performance |
| Timeline |
| Imperial Brands PLC |
| Apax Global Alpha |
Imperial Brands and Apax Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Apax Global
The main advantage of trading using opposite Imperial Brands and Apax Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Apax Global 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 Apax Global will offset losses from the drop in Apax Global's long position.| Imperial Brands vs. Batm Advanced Communications | Imperial Brands vs. Monks Investment Trust | Imperial Brands vs. EJF Investments | Imperial Brands vs. Cellnex Telecom SA |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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