Correlation Between BRIT AMER and CHRISTIAN DIOR

Can any of the company-specific risk be diversified away by investing in both BRIT AMER and CHRISTIAN DIOR 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 BRIT AMER and CHRISTIAN DIOR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRIT AMER TOBACCO and CHRISTIAN DIOR ADR14EO2, you can compare the effects of market volatilities on BRIT AMER and CHRISTIAN DIOR 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 BRIT AMER with a short position of CHRISTIAN DIOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and CHRISTIAN DIOR.

Diversification Opportunities for BRIT AMER and CHRISTIAN DIOR

-0.11

Correlation Coefficient

BRIT AMER  CHRISTIAN DIOR

Good diversification

The 3 months correlation between BRIT and CHRISTIAN is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and CHRISTIAN DIOR ADR14EO2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHRISTIAN DIOR ADR14EO2 and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with CHRISTIAN DIOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHRISTIAN DIOR ADR14EO2 has no effect on the direction of BRIT AMER i.e., BRIT AMER and CHRISTIAN DIOR go up and down completely randomly.

Pair Corralation between BRIT AMER and CHRISTIAN DIOR

Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.6 times more return on investment than CHRISTIAN DIOR. However, BRIT AMER TOBACCO is 1.68 times less risky than CHRISTIAN DIOR. It trades about 0.17 of its potential returns per unit of risk. CHRISTIAN DIOR ADR14EO2 is currently generating about 0.0 per unit of risk. If you would invest  3,181  in BRIT AMER TOBACCO on October 11, 2024 and sell it today you would earn a total of  395.00  from holding BRIT AMER TOBACCO or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

BRIT AMER TOBACCO  vs.  CHRISTIAN DIOR ADR14EO2

BRIT AMER TOBACCO

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BRIT AMER unveiled solid returns over the last few months and may actually be approaching a breakup point.

CHRISTIAN DIOR ADR14EO2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHRISTIAN DIOR ADR14EO2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CHRISTIAN DIOR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BRIT AMER and CHRISTIAN DIOR

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

The idea behind BRIT AMER TOBACCO and CHRISTIAN DIOR ADR14EO2 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.