Correlation Between Paramount Global and British American
Can any of the company-specific risk be diversified away by investing in both Paramount Global and British American 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 Paramount Global and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paramount Global and British American Tobacco, you can compare the effects of market volatilities on Paramount Global and British American 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 Paramount Global with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Global and British American.
Diversification Opportunities for Paramount Global and British American
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Paramount and British is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Global and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Paramount Global 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 Paramount Global are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Paramount Global i.e., Paramount Global and British American go up and down completely randomly.
Pair Corralation between Paramount Global and British American
Assuming the 90 days trading horizon Paramount Global is expected to generate 1.67 times more return on investment than British American. However, Paramount Global is 1.67 times more volatile than British American Tobacco. It trades about 0.11 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.08 per unit of risk. If you would invest 5,730 in Paramount Global on September 7, 2024 and sell it today you would earn a total of 766.00 from holding Paramount Global or generate 13.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Paramount Global vs. British American Tobacco
Performance |
Timeline |
Paramount Global |
British American Tobacco |
Paramount Global and British American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Paramount Global and British American
The main advantage of trading using opposite Paramount Global and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Global position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.Paramount Global vs. Align Technology | Paramount Global vs. Unifique Telecomunicaes SA | Paramount Global vs. Micron Technology | Paramount Global vs. UnitedHealth Group Incorporated |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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