Correlation Between British American and Global X
Can any of the company-specific risk be diversified away by investing in both British American and Global X 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 British American and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Global X Funds, you can compare the effects of market volatilities on British American and Global X 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 British American with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Global X.
Diversification Opportunities for British American and Global X
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between British and Global is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and British American 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 British American Tobacco are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of British American i.e., British American and Global X go up and down completely randomly.
Pair Corralation between British American and Global X
Assuming the 90 days trading horizon British American is expected to generate 3.68 times less return on investment than Global X. But when comparing it to its historical volatility, British American Tobacco is 1.05 times less risky than Global X. It trades about 0.09 of its potential returns per unit of risk. Global X Funds is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,034 in Global X Funds on September 6, 2024 and sell it today you would earn a total of 1,121 from holding Global X Funds or generate 27.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
British American Tobacco vs. Global X Funds
Performance |
Timeline |
British American Tobacco |
Global X Funds |
British American and Global X Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with British American and Global X
The main advantage of trading using opposite British American and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.British American vs. Take Two Interactive Software | British American vs. MAHLE Metal Leve | British American vs. Bemobi Mobile Tech | British American vs. Paycom Software |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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