Correlation Between Imperial Brands and Mitie Group
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Mitie Group 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 Mitie Group 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 Mitie Group PLC, you can compare the effects of market volatilities on Imperial Brands and Mitie Group 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 Mitie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Mitie Group.
Diversification Opportunities for Imperial Brands and Mitie Group
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Imperial and Mitie is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Imperial Brands i.e., Imperial Brands and Mitie Group go up and down completely randomly.
Pair Corralation between Imperial Brands and Mitie Group
Assuming the 90 days trading horizon Imperial Brands is expected to generate 1.21 times less return on investment than Mitie Group. But when comparing it to its historical volatility, Imperial Brands PLC is 1.59 times less risky than Mitie Group. It trades about 0.09 of its potential returns per unit of risk. Mitie Group PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,226 in Mitie Group PLC on November 2, 2024 and sell it today you would earn a total of 4,454 from holding Mitie Group PLC or generate 61.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Brands PLC vs. Mitie Group PLC
Performance |
| Timeline |
| Imperial Brands PLC |
| Mitie Group PLC |
Imperial Brands and Mitie Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Mitie Group
The main advantage of trading using opposite Imperial Brands and Mitie Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Mitie Group 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 Mitie Group will offset losses from the drop in Mitie Group'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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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