Correlation Between BRIT AMER and Takara Holdings

Can any of the company-specific risk be diversified away by investing in both BRIT AMER and Takara Holdings 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 Takara Holdings 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 Takara Holdings, you can compare the effects of market volatilities on BRIT AMER and Takara Holdings 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 Takara Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Takara Holdings.

Diversification Opportunities for BRIT AMER and Takara Holdings

0.82

Correlation Coefficient

BRIT AMER  Takara Holdings

Very poor diversification

The 3 months correlation between BRIT and Takara is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and Takara Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takara Holdings 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 Takara Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takara Holdings has no effect on the direction of BRIT AMER i.e., BRIT AMER and Takara Holdings go up and down completely randomly.

Pair Corralation between BRIT AMER and Takara Holdings

Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.67 times more return on investment than Takara Holdings. However, BRIT AMER TOBACCO is 1.49 times less risky than Takara Holdings. It trades about 0.03 of its potential returns per unit of risk. Takara Holdings is currently generating about 0.02 per unit of risk. If you would invest  3,047  in BRIT AMER TOBACCO on October 22, 2024 and sell it today you would earn a total of  473.00  from holding BRIT AMER TOBACCO or generate 15.52% return on investment over 90 days.

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

BRIT AMER TOBACCO  vs.  Takara Holdings

BRIT AMER TOBACCO

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BRIT AMER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Takara Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Takara Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Takara Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRIT AMER and Takara Holdings

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

The idea behind BRIT AMER TOBACCO and Takara Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.