Correlation Between VARIOUS EATERIES and IMPERIAL TOBACCO

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

By analyzing existing cross correlation between VARIOUS EATERIES LS and IMPERIAL TOBACCO , you can compare the effects of market volatilities on VARIOUS EATERIES and IMPERIAL TOBACCO 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 VARIOUS EATERIES with a short position of IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and IMPERIAL TOBACCO.

Diversification Opportunities for VARIOUS EATERIES and IMPERIAL TOBACCO

-0.67

Correlation Coefficient

VARIOUS EATERIES  IMPERIAL TOBACCO

Excellent diversification

The 3 months correlation between VARIOUS and IMPERIAL is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and IMPERIAL TOBACCO go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and IMPERIAL TOBACCO

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the IMPERIAL TOBACCO. In addition to that, VARIOUS EATERIES is 5.35 times more volatile than IMPERIAL TOBACCO . It trades about -0.11 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.13 per unit of volatility. If you would invest  3,035  in IMPERIAL TOBACCO on December 22, 2024 and sell it today you would earn a total of  205.00  from holding IMPERIAL TOBACCO or generate 6.75% return on investment over 90 days.

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

VARIOUS EATERIES LS  vs.  IMPERIAL TOBACCO

VARIOUS EATERIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

IMPERIAL TOBACCO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, IMPERIAL TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with VARIOUS EATERIES and IMPERIAL TOBACCO

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

The idea behind VARIOUS EATERIES LS and IMPERIAL 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.