Correlation Between British Amer and Green Cures

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

Diversification Opportunities for British Amer and Green Cures

-0.03

Correlation Coefficient

British Amer  Green Cures

Good diversification

The 3 months correlation between British and Green is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Green Cures Botanical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cures Botanical 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 Green Cures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cures Botanical has no effect on the direction of British Amer i.e., British Amer and Green Cures go up and down completely randomly.

Pair Corralation between British Amer and Green Cures

Considering the 90-day investment horizon British American Tobacco is expected to under-perform the Green Cures. But the stock apears to be less risky and, when comparing its historical volatility, British American Tobacco is 84.86 times less risky than Green Cures. The stock trades about -0.09 of its potential returns per unit of risk. The Green Cures Botanical is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Green Cures Botanical on September 27, 2024 and sell it today you would lose (0.01) from holding Green Cures Botanical or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

British American Tobacco  vs.  Green Cures Botanical

British American Tobacco

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Green Cures Botanical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Green Cures Botanical are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, Green Cures unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with British Amer and Green Cures

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

The idea behind British American Tobacco and Green Cures Botanical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.