Correlation Between British American and Sirius Real

Can any of the company-specific risk be diversified away by investing in both British American and Sirius Real 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 Sirius Real 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 Sirius Real Estate, you can compare the effects of market volatilities on British American and Sirius Real 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 Sirius Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Sirius Real.

Diversification Opportunities for British American and Sirius Real

-0.55

Correlation Coefficient

British American  Sirius Real

Excellent diversification

The 3 months correlation between British and Sirius is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Sirius Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sirius Real Estate 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 Sirius Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sirius Real Estate has no effect on the direction of British American i.e., British American and Sirius Real go up and down completely randomly.

Pair Corralation between British American and Sirius Real

Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.91 times more return on investment than Sirius Real. However, British American Tobacco is 1.1 times less risky than Sirius Real. It trades about -0.07 of its potential returns per unit of risk. Sirius Real Estate is currently generating about -0.6 per unit of risk. If you would invest  3,705  in British American Tobacco on October 11, 2024 and sell it today you would lose (56.00) from holding British American Tobacco or give up 1.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

British American Tobacco  vs.  Sirius Real Estate

British American Tobacco

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, British American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sirius Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sirius Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with British American and Sirius Real

The main advantage of trading using opposite British American and Sirius Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Sirius Real 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 Sirius Real will offset losses from the drop in Sirius Real's long position.

The idea behind British American Tobacco and Sirius Real Estate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.