Correlation Between British American and OFFICE DEPOT

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

Diversification Opportunities for British American and OFFICE DEPOT

0.0

Correlation Coefficient

British American  OFFICE DEPOT

Pay attention - limited upside

The 3 months correlation between British and OFFICE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and OFFICE DEPOT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFFICE DEPOT 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 OFFICE DEPOT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFFICE DEPOT has no effect on the direction of British American i.e., British American and OFFICE DEPOT go up and down completely randomly.

Pair Corralation between British American and OFFICE DEPOT

If you would invest  2,468  in British American Tobacco on September 24, 2024 and sell it today you would earn a total of  1,007  from holding British American Tobacco or generate 40.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

British American Tobacco  vs.  OFFICE DEPOT

British American Tobacco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, British American is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

OFFICE DEPOT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with British American and OFFICE DEPOT

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

The idea behind British American Tobacco and OFFICE DEPOT 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.