Correlation Between British Amer and Contextlogic

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

Diversification Opportunities for British Amer and Contextlogic

0.59

Correlation Coefficient

British Amer  Contextlogic

Very weak diversification

The 3 months correlation between British and Contextlogic is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Contextlogic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contextlogic 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 Contextlogic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contextlogic has no effect on the direction of British Amer i.e., British Amer and Contextlogic go up and down completely randomly.

Pair Corralation between British Amer and Contextlogic

Considering the 90-day investment horizon British Amer is expected to generate 1.35 times less return on investment than Contextlogic. But when comparing it to its historical volatility, British American Tobacco is 2.51 times less risky than Contextlogic. It trades about 0.14 of its potential returns per unit of risk. Contextlogic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  660.00  in Contextlogic on December 21, 2024 and sell it today you would earn a total of  92.00  from holding Contextlogic or generate 13.94% return on investment over 90 days.

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

British American Tobacco  vs.  Contextlogic

British American Tobacco

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, British Amer demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Contextlogic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Contextlogic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Contextlogic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with British Amer and Contextlogic

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

The idea behind British American Tobacco and Contextlogic 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.