Correlation Between Lowland Investment and British American
Can any of the company-specific risk be diversified away by investing in both Lowland Investment 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 Lowland Investment and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowland Investment Co and British American Tobacco, you can compare the effects of market volatilities on Lowland Investment 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 Lowland Investment with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowland Investment and British American.
Diversification Opportunities for Lowland Investment and British American
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lowland and British is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lowland Investment Co 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 Lowland Investment 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 Lowland Investment Co 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 Lowland Investment i.e., Lowland Investment and British American go up and down completely randomly.
Pair Corralation between Lowland Investment and British American
Assuming the 90 days trading horizon Lowland Investment Co is expected to generate 0.61 times more return on investment than British American. However, Lowland Investment Co is 1.64 times less risky than British American. It trades about -0.04 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.05 per unit of risk. If you would invest 12,500 in Lowland Investment Co on September 26, 2024 and sell it today you would lose (100.00) from holding Lowland Investment Co or give up 0.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowland Investment Co vs. British American Tobacco
Performance |
| Timeline |
| Lowland Investment |
| British American Tobacco |
Lowland Investment and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowland Investment and British American
The main advantage of trading using opposite Lowland Investment and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowland Investment 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.| Lowland Investment vs. Samsung Electronics Co | Lowland Investment vs. Samsung Electronics Co | Lowland Investment vs. Hyundai Motor | Lowland Investment vs. Toyota Motor Corp |
| British American vs. Uniper SE | British American vs. Mulberry Group PLC | British American vs. London Security Plc | British American vs. Triad Group PLC |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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