Correlation Between Smithson Investment and British American
Can any of the company-specific risk be diversified away by investing in both Smithson 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 Smithson 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 Smithson Investment Trust and British American Tobacco, you can compare the effects of market volatilities on Smithson 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 Smithson Investment with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and British American.
Diversification Opportunities for Smithson Investment and British American
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Smithson and British is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust 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 Smithson 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 Smithson Investment Trust 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 Smithson Investment i.e., Smithson Investment and British American go up and down completely randomly.
Pair Corralation between Smithson Investment and British American
Assuming the 90 days trading horizon Smithson Investment is expected to generate 1.23 times less return on investment than British American. In addition to that, Smithson Investment is 1.7 times more volatile than British American Tobacco. It trades about 0.3 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.64 per unit of volatility. If you would invest 3,514 in British American Tobacco on September 3, 2024 and sell it today you would earn a total of 283.00 from holding British American Tobacco or generate 8.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smithson Investment Trust vs. British American Tobacco
Performance |
| Timeline |
| Smithson Investment Trust |
| British American Tobacco |
Smithson Investment and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and British American
The main advantage of trading using opposite Smithson Investment and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson 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.| Smithson Investment vs. SupplyMe Capital PLC | Smithson Investment vs. 88 Energy | Smithson Investment vs. Vodafone Group PLC | Smithson Investment vs. Vodafone Group PLC |
| British American vs. FC Investment Trust | British American vs. Smithson Investment Trust | British American vs. Westlake Chemical Corp | British American vs. The Mercantile Investment |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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