Correlation Between Imperial Brands and British American
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Imperial Brands and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and British American.
Diversification Opportunities for Imperial Brands and British American
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Imperial and British is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Imperial Brands i.e., Imperial Brands and British American go up and down completely randomly.
Pair Corralation between Imperial Brands and British American
Assuming the 90 days horizon Imperial Brands PLC is expected to generate 0.87 times more return on investment than British American. However, Imperial Brands PLC is 1.15 times less risky than British American. It trades about 0.2 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.11 per unit of risk. If you would invest 2,537 in Imperial Brands PLC on November 2, 2024 and sell it today you would earn a total of 654.00 from holding Imperial Brands PLC or generate 25.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.04% |
| Values | Daily Returns |
Imperial Brands PLC vs. British American Tobacco
Performance |
| Timeline |
| Imperial Brands PLC |
| British American Tobacco |
Imperial Brands and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and British American
The main advantage of trading using opposite Imperial Brands and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Imperial Brands vs. CITY OFFICE REIT | Imperial Brands vs. MAVEN WIRELESS SWEDEN | Imperial Brands vs. Cognizant Technology Solutions | Imperial Brands vs. SCANSOURCE |
| British American vs. Algonquin Power Utilities | British American vs. Cleanaway Waste Management | British American vs. Moneysupermarket Group PLC | British American vs. United Utilities 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |