Correlation Between Polar Capital and British American
Can any of the company-specific risk be diversified away by investing in both Polar Capital 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 Polar Capital and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polar Capital Technology and British American Tobacco, you can compare the effects of market volatilities on Polar Capital 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 Polar Capital with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polar Capital and British American.
Diversification Opportunities for Polar Capital and British American
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Polar and British is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology 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 Polar Capital 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 Polar Capital Technology 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 Polar Capital i.e., Polar Capital and British American go up and down completely randomly.
Pair Corralation between Polar Capital and British American
Assuming the 90 days trading horizon Polar Capital is expected to generate 1.89 times less return on investment than British American. In addition to that, Polar Capital is 1.37 times more volatile than British American Tobacco. It trades about 0.11 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.28 per unit of volatility. If you would invest 3,626 in British American Tobacco on November 1, 2024 and sell it today you would earn a total of 311.00 from holding British American Tobacco or generate 8.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polar Capital Technology vs. British American Tobacco
Performance |
| Timeline |
| Polar Capital Technology |
| British American Tobacco |
Polar Capital and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polar Capital and British American
The main advantage of trading using opposite Polar Capital and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital 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.| Polar Capital vs. Veolia Environnement VE | Polar Capital vs. Software Circle plc | Polar Capital vs. Vitec Software Group | Polar Capital vs. Dentsply Sirona |
| British American vs. Polar Capital Technology | British American vs. Jacquet Metal Service | British American vs. Gaztransport et Technigaz | British American vs. Empire Metals Limited |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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