Correlation Between Altria and British Amer
Can any of the company-specific risk be diversified away by investing in both Altria and British Amer 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 Altria and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and British American Tobacco, you can compare the effects of market volatilities on Altria and British Amer 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 Altria with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and British Amer.
Diversification Opportunities for Altria and British Amer
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Altria and British is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group 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 Altria 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 Altria Group are associated (or correlated) with British Amer. 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 Altria i.e., Altria and British Amer go up and down completely randomly.
Pair Corralation between Altria and British Amer
Allowing for the 90-day total investment horizon Altria Group is expected to generate 2.16 times more return on investment than British Amer. However, Altria is 2.16 times more volatile than British American Tobacco. It trades about 0.33 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.38 per unit of risk. If you would invest 5,025 in Altria Group on August 28, 2024 and sell it today you would earn a total of 650.00 from holding Altria Group or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altria Group vs. British American Tobacco
Performance |
| Timeline |
| Altria Group |
| British American Tobacco |
Altria and British Amer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and British Amer
The main advantage of trading using opposite Altria and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria position performs unexpectedly, British Amer 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 Amer will offset losses from the drop in British Amer's long position.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
| British Amer vs. Philip Morris International | British Amer vs. Universal | British Amer vs. Imperial Brands PLC | British Amer vs. Altria 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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