Correlation Between Commercial International and Britvic PLC

Can any of the company-specific risk be diversified away by investing in both Commercial International and Britvic PLC 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 Commercial International and Britvic PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Commercial International Bank and Britvic PLC ADR, you can compare the effects of market volatilities on Commercial International and Britvic PLC 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 Commercial International with a short position of Britvic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commercial International and Britvic PLC.

Diversification Opportunities for Commercial International and Britvic PLC

0.13

Correlation Coefficient

Commercial International  Britvic PLC

Average diversification

The 3 months correlation between Commercial and Britvic is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Commercial International Bank and Britvic PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Britvic PLC ADR and Commercial International 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 Commercial International Bank are associated (or correlated) with Britvic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Britvic PLC ADR has no effect on the direction of Commercial International i.e., Commercial International and Britvic PLC go up and down completely randomly.

Pair Corralation between Commercial International and Britvic PLC

Assuming the 90 days horizon Commercial International Bank is expected to generate 1.77 times more return on investment than Britvic PLC. However, Commercial International is 1.77 times more volatile than Britvic PLC ADR. It trades about -0.05 of its potential returns per unit of risk. Britvic PLC ADR is currently generating about -0.1 per unit of risk. If you would invest  150.00  in Commercial International Bank on October 26, 2024 and sell it today you would lose (7.00) from holding Commercial International Bank or give up 4.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Commercial International Bank  vs.  Britvic PLC ADR

Commercial International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commercial International Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Commercial International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Britvic PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Britvic PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Britvic PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Commercial International and Britvic PLC

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

The idea behind Commercial International Bank and Britvic PLC ADR 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.