Correlation Between British Amer and Imax Corp

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

Diversification Opportunities for British Amer and Imax Corp

0.78

Correlation Coefficient

British Amer  Imax Corp

Poor diversification

The 3 months correlation between British and Imax is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Imax Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imax Corp 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 Imax Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imax Corp has no effect on the direction of British Amer i.e., British Amer and Imax Corp go up and down completely randomly.

Pair Corralation between British Amer and Imax Corp

Considering the 90-day investment horizon British American Tobacco is expected to generate 0.28 times more return on investment than Imax Corp. However, British American Tobacco is 3.53 times less risky than Imax Corp. It trades about -0.06 of its potential returns per unit of risk. Imax Corp is currently generating about -0.25 per unit of risk. If you would invest  3,698  in British American Tobacco on October 12, 2024 and sell it today you would lose (24.00) from holding British American Tobacco or give up 0.65% of portfolio value over 90 days.

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

British American Tobacco  vs.  Imax Corp

British American Tobacco

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 8 (%) 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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Imax Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Imax Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Imax Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with British Amer and Imax Corp

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

The idea behind British American Tobacco and Imax Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.