Correlation Between 22nd Century and Imperial Brands
Can any of the company-specific risk be diversified away by investing in both 22nd Century and Imperial Brands 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 22nd Century and Imperial Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 22nd Century Group and Imperial Brands PLC, you can compare the effects of market volatilities on 22nd Century and Imperial Brands 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 22nd Century with a short position of Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of 22nd Century and Imperial Brands.
Diversification Opportunities for 22nd Century and Imperial Brands
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between 22nd and Imperial is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding 22nd Century Group and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC and 22nd Century 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 22nd Century Group are associated (or correlated) with Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of 22nd Century i.e., 22nd Century and Imperial Brands go up and down completely randomly.
Pair Corralation between 22nd Century and Imperial Brands
Given the investment horizon of 90 days 22nd Century Group is expected to under-perform the Imperial Brands. In addition to that, 22nd Century is 2.52 times more volatile than Imperial Brands PLC. It trades about -0.1 of its total potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.07 per unit of volatility. If you would invest 3,090 in Imperial Brands PLC on August 28, 2024 and sell it today you would earn a total of 103.00 from holding Imperial Brands PLC or generate 3.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
22nd Century Group vs. Imperial Brands PLC
Performance |
| Timeline |
| 22nd Century Group |
| Imperial Brands PLC |
22nd Century and Imperial Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 22nd Century and Imperial Brands
The main advantage of trading using opposite 22nd Century and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 22nd Century position performs unexpectedly, Imperial Brands 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 Brands will offset losses from the drop in Imperial Brands' long position.| 22nd Century vs. Turning Point Brands | 22nd Century vs. Green Globe International | 22nd Century vs. Imperial Brands PLC | 22nd Century vs. Kaival Brands Innovations |
| Imperial Brands vs. Imperial Brands PLC | Imperial Brands vs. RLX Technology | Imperial Brands vs. British American Tobacco | Imperial Brands vs. Turning Point Brands |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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