Correlation Between ALSP Orchid and British Amer

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

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

Diversification Opportunities for ALSP Orchid and British Amer

0.32

Correlation Coefficient

ALSP Orchid  British Amer

Weak diversification

The 3 months correlation between ALSP and British is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ALSP Orchid Acquisition 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 ALSP Orchid 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 ALSP Orchid Acquisition 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 ALSP Orchid i.e., ALSP Orchid and British Amer go up and down completely randomly.

Pair Corralation between ALSP Orchid and British Amer

If you would invest  3,658  in British American Tobacco on October 26, 2024 and sell it today you would earn a total of  47.00  from holding British American Tobacco or generate 1.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	2.56%
Values	Daily Returns

ALSP Orchid Acquisition  vs.  British American Tobacco

ALSP Orchid Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALSP Orchid Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ALSP Orchid is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

British American Tobacco

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ALSP Orchid and British Amer

The main advantage of trading using opposite ALSP Orchid and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALSP Orchid 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 ALSP Orchid Acquisition 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.