Correlation Between TOTAL GABON and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both TOTAL GABON and IMPERIAL TOBACCO 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 TOTAL GABON and IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOTAL GABON and IMPERIAL TOBACCO , you can compare the effects of market volatilities on TOTAL GABON and IMPERIAL TOBACCO 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 TOTAL GABON with a short position of IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOTAL GABON and IMPERIAL TOBACCO.
Diversification Opportunities for TOTAL GABON and IMPERIAL TOBACCO
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TOTAL and IMPERIAL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TOTAL GABON and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and TOTAL GABON 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 TOTAL GABON are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of TOTAL GABON i.e., TOTAL GABON and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between TOTAL GABON and IMPERIAL TOBACCO
Assuming the 90 days trading horizon TOTAL GABON is expected to generate 2.08 times more return on investment than IMPERIAL TOBACCO. However, TOTAL GABON is 2.08 times more volatile than IMPERIAL TOBACCO . It trades about 0.11 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.23 per unit of risk. If you would invest 15,850 in TOTAL GABON on September 12, 2024 and sell it today you would earn a total of 2,850 from holding TOTAL GABON or generate 17.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOTAL GABON vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| TOTAL GABON |
| IMPERIAL TOBACCO |
TOTAL GABON and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOTAL GABON and IMPERIAL TOBACCO
The main advantage of trading using opposite TOTAL GABON and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOTAL GABON position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| TOTAL GABON vs. SEALED AIR | TOTAL GABON vs. LAir Liquide SA | TOTAL GABON vs. DELTA AIR LINES | TOTAL GABON vs. GLG LIFE TECH |
| IMPERIAL TOBACCO vs. SLR Investment Corp | IMPERIAL TOBACCO vs. CyberArk Software | IMPERIAL TOBACCO vs. PennantPark Investment | IMPERIAL TOBACCO vs. ECHO INVESTMENT ZY |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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