Correlation Between Sligro Food and British American

Can any of the company-specific risk be diversified away by investing in both Sligro Food 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 Sligro Food and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sligro Food Group and British American Tobacco, you can compare the effects of market volatilities on Sligro Food 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 Sligro Food with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sligro Food and British American.

Diversification Opportunities for Sligro Food and British American

-0.69

Correlation Coefficient

Sligro Food  British American

Excellent diversification

The 3 months correlation between Sligro and British is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sligro Food Group 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 Sligro Food 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 Sligro Food Group 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 Sligro Food i.e., Sligro Food and British American go up and down completely randomly.

Pair Corralation between Sligro Food and British American

Assuming the 90 days trading horizon Sligro Food Group is expected to generate 0.83 times more return on investment than British American. However, Sligro Food Group is 1.21 times less risky than British American. It trades about 0.23 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.1 per unit of risk. If you would invest  1,070  in Sligro Food Group on October 3, 2024 and sell it today you would earn a total of  45.00  from holding Sligro Food Group or generate 4.21% return on investment over 90 days.

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

Sligro Food Group  vs.  British American Tobacco

Sligro Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sligro Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

British American Tobacco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, British American is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sligro Food and British American

The main advantage of trading using opposite Sligro Food and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sligro Food 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.

The idea behind Sligro Food Group and British American Tobacco 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.