Correlation Between LIFENET INSURANCE and British American

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

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

Diversification Opportunities for LIFENET INSURANCE and British American

0.44

Correlation Coefficient

LIFENET INSURANCE  British American

Very weak diversification

The 3 months correlation between LIFENET and British is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding LIFENET INSURANCE CO 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 LIFENET INSURANCE 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 LIFENET INSURANCE CO 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 LIFENET INSURANCE i.e., LIFENET INSURANCE and British American go up and down completely randomly.

Pair Corralation between LIFENET INSURANCE and British American

Assuming the 90 days horizon LIFENET INSURANCE is expected to generate 1.27 times less return on investment than British American. In addition to that, LIFENET INSURANCE is 2.48 times more volatile than British American Tobacco. It trades about 0.07 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.22 per unit of volatility. If you would invest  3,163  in British American Tobacco on October 5, 2024 and sell it today you would earn a total of  405.00  from holding British American Tobacco or generate 12.8% return on investment over 90 days.

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

LIFENET INSURANCE CO  vs.  British American Tobacco

LIFENET INSURANCE

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days LIFENET INSURANCE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, LIFENET INSURANCE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

British American Tobacco

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days British American Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, British American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIFENET INSURANCE and British American

The main advantage of trading using opposite LIFENET INSURANCE and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFENET INSURANCE 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 LIFENET INSURANCE CO 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.