Correlation Between Adcock Ingram and British Amer

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

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

Diversification Opportunities for Adcock Ingram and British Amer

-0.62

Correlation Coefficient

Adcock Ingram  British Amer

Excellent diversification

The 3 months correlation between Adcock and British is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Adcock Ingram Holdings 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 Adcock Ingram 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 Adcock Ingram Holdings are associated (or correlated) with British Amer. 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 Adcock Ingram i.e., Adcock Ingram and British Amer go up and down completely randomly.

Pair Corralation between Adcock Ingram and British Amer

Assuming the 90 days trading horizon Adcock Ingram is expected to generate 1.79 times less return on investment than British Amer. In addition to that, Adcock Ingram is 1.57 times more volatile than British American Tobacco. It trades about 0.03 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.1 per unit of volatility. If you would invest  5,142,775  in British American Tobacco on October 2, 2024 and sell it today you would earn a total of  1,622,925  from holding British American Tobacco or generate 31.56% return on investment over 90 days.

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

Adcock Ingram Holdings  vs.  British American Tobacco

Adcock Ingram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adcock Ingram Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adcock Ingram is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

British American Tobacco

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Adcock Ingram and British Amer

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

The idea behind Adcock Ingram Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.