Correlation Between British Amer and E Media

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

Diversification Opportunities for British Amer and E Media

-0.21

Correlation Coefficient

British Amer  E Media

Very good diversification

The 3 months correlation between British and EMH is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and E Media Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Media Holdings 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 E Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Media Holdings has no effect on the direction of British Amer i.e., British Amer and E Media go up and down completely randomly.

Pair Corralation between British Amer and E Media

Assuming the 90 days trading horizon British Amer is expected to generate 38.9 times less return on investment than E Media. But when comparing it to its historical volatility, British American Tobacco is 35.73 times less risky than E Media. It trades about 0.04 of its potential returns per unit of risk. E Media Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  40,096  in E Media Holdings on October 23, 2024 and sell it today you would lose (6,596) from holding E Media Holdings or give up 16.45% of portfolio value over 90 days.

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

British American Tobacco  vs.  E Media Holdings

British American Tobacco

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

E Media Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days E Media Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with British Amer and E Media

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

The idea behind British American Tobacco and E Media 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.