Correlation Between Universal Partners and British Amer
Can any of the company-specific risk be diversified away by investing in both Universal Partners 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 Universal Partners and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Partners and British American Tobacco, you can compare the effects of market volatilities on Universal Partners 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 Universal Partners with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Partners and British Amer.
Diversification Opportunities for Universal Partners and British Amer
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and British is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Universal Partners 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 Universal Partners 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 Universal Partners 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 Universal Partners i.e., Universal Partners and British Amer go up and down completely randomly.
Pair Corralation between Universal Partners and British Amer
Assuming the 90 days trading horizon Universal Partners is expected to under-perform the British Amer. In addition to that, Universal Partners is 2.51 times more volatile than British American Tobacco. It trades about -0.07 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.39 per unit of volatility. If you would invest 6,160,000 in British American Tobacco on September 5, 2024 and sell it today you would earn a total of 599,200 from holding British American Tobacco or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Universal Partners vs. British American Tobacco
Performance |
| Timeline |
| Universal Partners |
| British American Tobacco |
Universal Partners and British Amer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Partners and British Amer
The main advantage of trading using opposite Universal Partners and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Partners 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.| Universal Partners vs. British American Tobacco | Universal Partners vs. We Buy Cars | Universal Partners vs. Harmony Gold Mining | Universal Partners vs. City Lodge Hotels |
| British Amer vs. Sasol Ltd Bee | British Amer vs. Centaur Bci Balanced | British Amer vs. Growthpoint Properties | British Amer vs. Coronation Global Equity |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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