Correlation Between British Amer and Artisan Partners

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

Diversification Opportunities for British Amer and Artisan Partners

0.3

Correlation Coefficient

British Amer  Artisan Partners

Weak diversification

The 3 months correlation between British and Artisan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Artisan Partners Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Partners Asset 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 Artisan Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Partners Asset has no effect on the direction of British Amer i.e., British Amer and Artisan Partners go up and down completely randomly.

Pair Corralation between British Amer and Artisan Partners

Considering the 90-day investment horizon British American Tobacco is expected to generate 0.64 times more return on investment than Artisan Partners. However, British American Tobacco is 1.57 times less risky than Artisan Partners. It trades about 0.02 of its potential returns per unit of risk. Artisan Partners Asset is currently generating about -0.09 per unit of risk. If you would invest  3,622  in British American Tobacco on October 22, 2024 and sell it today you would earn a total of  8.00  from holding British American Tobacco or generate 0.22% return on investment over 90 days.

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

British American Tobacco  vs.  Artisan Partners Asset

British American Tobacco

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Artisan Partners Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Partners Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Artisan Partners is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with British Amer and Artisan Partners

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

The idea behind British American Tobacco and Artisan Partners Asset 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 CEOs Directory module to screen CEOs from public companies around the world.