Correlation Between Imperial Brands and J Sainsbury
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and J Sainsbury 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 J Sainsbury 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 J Sainsbury plc, you can compare the effects of market volatilities on Imperial Brands and J Sainsbury 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 J Sainsbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and J Sainsbury.
Diversification Opportunities for Imperial Brands and J Sainsbury
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Imperial and JSNSF is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury 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 J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Imperial Brands i.e., Imperial Brands and J Sainsbury go up and down completely randomly.
Pair Corralation between Imperial Brands and J Sainsbury
Assuming the 90 days horizon Imperial Brands PLC is expected to generate 0.29 times more return on investment than J Sainsbury. However, Imperial Brands PLC is 3.44 times less risky than J Sainsbury. It trades about 0.12 of its potential returns per unit of risk. J Sainsbury plc is currently generating about 0.02 per unit of risk. If you would invest 1,993 in Imperial Brands PLC on August 31, 2024 and sell it today you would earn a total of 1,346 from holding Imperial Brands PLC or generate 67.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 52.55% |
| Values | Daily Returns |
Imperial Brands PLC vs. J Sainsbury plc
Performance |
| Timeline |
| Imperial Brands PLC |
| J Sainsbury plc |
Imperial Brands and J Sainsbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and J Sainsbury
The main advantage of trading using opposite Imperial Brands and J Sainsbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, J Sainsbury 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 J Sainsbury will offset losses from the drop in J Sainsbury's long position.| Imperial Brands vs. Japan Tobacco | Imperial Brands vs. British American Tobacco | Imperial Brands vs. Turning Point Brands | Imperial Brands vs. Universal |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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