Correlation Between Chocoladefabriken and British American

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

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

Diversification Opportunities for Chocoladefabriken and British American

-0.7

Correlation Coefficient

Chocoladefabriken  British American

Excellent diversification

The 3 months correlation between Chocoladefabriken and British is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Chocoladefabriken Lindt Spruen 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 Chocoladefabriken 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 Chocoladefabriken Lindt Spruengli 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 Chocoladefabriken i.e., Chocoladefabriken and British American go up and down completely randomly.

Pair Corralation between Chocoladefabriken and British American

Assuming the 90 days trading horizon Chocoladefabriken Lindt Spruengli is expected to under-perform the British American. But the stock apears to be less risky and, when comparing its historical volatility, Chocoladefabriken Lindt Spruengli is 1.47 times less risky than British American. The stock trades about -0.01 of its potential returns per unit of risk. The British American Tobacco is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,565  in British American Tobacco on October 5, 2024 and sell it today you would earn a total of  1,079  from holding British American Tobacco or generate 42.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.51%
Values	Daily Returns

Chocoladefabriken Lindt Spruen  vs.  British American Tobacco

Chocoladefabriken Lindt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chocoladefabriken Lindt Spruengli has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 Chocoladefabriken and British American

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.