Correlation Between Imperial Brands and Humble Fume
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Humble Fume 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 Humble Fume 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 Humble Fume, you can compare the effects of market volatilities on Imperial Brands and Humble Fume 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 Humble Fume. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Humble Fume.
Diversification Opportunities for Imperial Brands and Humble Fume
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Imperial and Humble is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Humble Fume in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humble Fume 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 Humble Fume. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humble Fume has no effect on the direction of Imperial Brands i.e., Imperial Brands and Humble Fume go up and down completely randomly.
Pair Corralation between Imperial Brands and Humble Fume
Assuming the 90 days horizon Imperial Brands is expected to generate 15.76 times less return on investment than Humble Fume. But when comparing it to its historical volatility, Imperial Brands PLC is 15.06 times less risky than Humble Fume. It trades about 0.06 of its potential returns per unit of risk. Humble Fume is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7.13 in Humble Fume on August 25, 2024 and sell it today you would lose (1.79) from holding Humble Fume or give up 25.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.85% |
| Values | Daily Returns |
Imperial Brands PLC vs. Humble Fume
Performance |
| Timeline |
| Imperial Brands PLC |
| Humble Fume |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Imperial Brands and Humble Fume Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Humble Fume
The main advantage of trading using opposite Imperial Brands and Humble Fume positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Humble Fume 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 Humble Fume will offset losses from the drop in Humble Fume's long position.| Imperial Brands vs. Japan Tobacco | Imperial Brands vs. British American Tobacco | Imperial Brands vs. Turning Point Brands | Imperial Brands vs. Universal |
| Humble Fume vs. PT Hanjaya Mandala | Humble Fume vs. Greenlane Holdings | Humble Fume vs. Pyxus International | Humble Fume vs. 22nd Century Group |
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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