Correlation Between IMPERIAL TOBACCO and National Storage
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and National Storage 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 TOBACCO and National Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and National Storage Affiliates, you can compare the effects of market volatilities on IMPERIAL TOBACCO and National Storage 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 TOBACCO with a short position of National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and National Storage.
Diversification Opportunities for IMPERIAL TOBACCO and National Storage
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between IMPERIAL and National is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff and IMPERIAL TOBACCO 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 TOBACCO are associated (or correlated) with National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and National Storage go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and National Storage
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 1.15 times less return on investment than National Storage. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 1.76 times less risky than National Storage. It trades about 0.4 of its potential returns per unit of risk. National Storage Affiliates is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,805 in National Storage Affiliates on September 5, 2024 and sell it today you would earn a total of 446.00 from holding National Storage Affiliates or generate 11.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. National Storage Affiliates
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| National Storage Aff |
IMPERIAL TOBACCO and National Storage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and National Storage
The main advantage of trading using opposite IMPERIAL TOBACCO and National Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, National Storage 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 National Storage will offset losses from the drop in National Storage's long position.| IMPERIAL TOBACCO vs. GOODYEAR T RUBBER | IMPERIAL TOBACCO vs. Materialise NV | IMPERIAL TOBACCO vs. APPLIED MATERIALS | IMPERIAL TOBACCO vs. China Resources Beer |
| National Storage vs. MYFAIR GOLD P | National Storage vs. HF SINCLAIR P | National Storage vs. IMPERIAL TOBACCO | National Storage vs. Air New Zealand |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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