Correlation Between British Amer and Satrix Indi

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

Diversification Opportunities for British Amer and Satrix Indi

0.16

Correlation Coefficient

British Amer  Satrix Indi

Average diversification

The 3 months correlation between British and Satrix is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Satrix Indi ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satrix Indi ETF 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 Satrix Indi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satrix Indi ETF has no effect on the direction of British Amer i.e., British Amer and Satrix Indi go up and down completely randomly.

Pair Corralation between British Amer and Satrix Indi

Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.93 times more return on investment than Satrix Indi. However, British American Tobacco is 1.08 times less risky than Satrix Indi. It trades about 0.08 of its potential returns per unit of risk. Satrix Indi ETF is currently generating about -0.11 per unit of risk. If you would invest  6,652,000  in British American Tobacco on October 20, 2024 and sell it today you would earn a total of  92,000  from holding British American Tobacco or generate 1.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

British American Tobacco  vs.  Satrix Indi ETF

British American Tobacco

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, British Amer exhibited solid returns over the last few months and may actually be approaching a breakup point.

Satrix Indi ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Satrix Indi ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Satrix Indi 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 Satrix Indi

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

The idea behind British American Tobacco and Satrix Indi ETF 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.