Correlation Between British American and AP Moeller
Can any of the company-specific risk be diversified away by investing in both British American and AP Moeller 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 British American and AP Moeller into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and AP Moeller Maersk AS, you can compare the effects of market volatilities on British American and AP Moeller 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 British American with a short position of AP Moeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and AP Moeller.
Diversification Opportunities for British American and AP Moeller
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and 0O76 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and AP Moeller Maersk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Moeller Maersk and British American 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 British American Tobacco are associated (or correlated) with AP Moeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Moeller Maersk has no effect on the direction of British American i.e., British American and AP Moeller go up and down completely randomly.
Pair Corralation between British American and AP Moeller
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.57 times more return on investment than AP Moeller. However, British American Tobacco is 1.76 times less risky than AP Moeller. It trades about -0.03 of its potential returns per unit of risk. AP Moeller Maersk AS is currently generating about -0.1 per unit of risk. If you would invest 3,643 in British American Tobacco on September 23, 2024 and sell it today you would lose (33.00) from holding British American Tobacco or give up 0.91% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
British American Tobacco vs. AP Moeller Maersk AS
Performance |
Timeline |
British American Tobacco |
AP Moeller Maersk |
British American and AP Moeller Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with British American and AP Moeller
The main advantage of trading using opposite British American and AP Moeller positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, AP Moeller 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 AP Moeller will offset losses from the drop in AP Moeller's long position.British American vs. Uniper SE | British American vs. Mulberry Group PLC | British American vs. London Security Plc | British American vs. Triad Group PLC |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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