Correlation Between British Amer and CoreShares Income

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

Diversification Opportunities for British Amer and CoreShares Income

0.29

Correlation Coefficient

British Amer  CoreShares Income

Modest diversification

The 3 months correlation between British and CoreShares is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and CoreShares Income AMETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreShares Income AMETF 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 CoreShares Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreShares Income AMETF has no effect on the direction of British Amer i.e., British Amer and CoreShares Income go up and down completely randomly.

Pair Corralation between British Amer and CoreShares Income

Assuming the 90 days trading horizon British American Tobacco is expected to generate 4.33 times more return on investment than CoreShares Income. However, British Amer is 4.33 times more volatile than CoreShares Income AMETF. It trades about -0.01 of its potential returns per unit of risk. CoreShares Income AMETF is currently generating about -0.03 per unit of risk. If you would invest  6,784,468  in British American Tobacco on September 14, 2024 and sell it today you would lose (54,768) from holding British American Tobacco or give up 0.81% of portfolio value over 90 days.

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

British American Tobacco  vs.  CoreShares Income AMETF

British American Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

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

CoreShares Income AMETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoreShares Income AMETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CoreShares Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with British Amer and CoreShares Income

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

The idea behind British American Tobacco and CoreShares Income AMETF 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.