Correlation Between British Amer and Bowler Metcalf
Can any of the company-specific risk be diversified away by investing in both British Amer and Bowler Metcalf 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 Amer and Bowler Metcalf 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 Bowler Metcalf, you can compare the effects of market volatilities on British Amer and Bowler Metcalf 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 Amer with a short position of Bowler Metcalf. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Bowler Metcalf.
Diversification Opportunities for British Amer and Bowler Metcalf
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between British and Bowler is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Bowler Metcalf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowler Metcalf and British 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 British American Tobacco are associated (or correlated) with Bowler Metcalf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowler Metcalf has no effect on the direction of British Amer i.e., British Amer and Bowler Metcalf go up and down completely randomly.
Pair Corralation between British Amer and Bowler Metcalf
Assuming the 90 days trading horizon British Amer is expected to generate 3.43 times less return on investment than Bowler Metcalf. But when comparing it to its historical volatility, British American Tobacco is 3.64 times less risky than Bowler Metcalf. It trades about 0.04 of its potential returns per unit of risk. Bowler Metcalf is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 88,708 in Bowler Metcalf on October 13, 2024 and sell it today you would earn a total of 47,492 from holding Bowler Metcalf or generate 53.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
British American Tobacco vs. Bowler Metcalf
Performance |
Timeline |
British American Tobacco |
Bowler Metcalf |
British Amer and Bowler Metcalf Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with British Amer and Bowler Metcalf
The main advantage of trading using opposite British Amer and Bowler Metcalf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Bowler Metcalf 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 Bowler Metcalf will offset losses from the drop in Bowler Metcalf's long position.British Amer vs. Boxer Retail | British Amer vs. Brimstone Investment | British Amer vs. MC Mining | British Amer vs. Trematon Capital Investments |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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