Correlation Between BRC and British Amer

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

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

Diversification Opportunities for BRC and British Amer

-0.52

Correlation Coefficient

BRC  British Amer

Excellent diversification

The 3 months correlation between BRC and British is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BRC Inc 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 BRC 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 BRC Inc 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 BRC i.e., BRC and British Amer go up and down completely randomly.

Pair Corralation between BRC and British Amer

Given the investment horizon of 90 days BRC is expected to generate 31.03 times less return on investment than British Amer. In addition to that, BRC is 2.77 times more volatile than British American Tobacco. It trades about 0.0 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.13 per unit of volatility. If you would invest  3,449  in British American Tobacco on October 7, 2024 and sell it today you would earn a total of  250.00  from holding British American Tobacco or generate 7.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BRC Inc  vs.  British American Tobacco

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

British American Tobacco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BRC and British Amer

The main advantage of trading using opposite BRC and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC 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 BRC Inc 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.