Correlation Between Fluor and British American

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

By analyzing existing cross correlation between Fluor and British American Tobacco, you can compare the effects of market volatilities on Fluor 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 Fluor with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fluor and British American.

Diversification Opportunities for Fluor and British American

-0.4

Correlation Coefficient

Fluor  British American

Very good diversification

The 3 months correlation between Fluor and British is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fluor 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 Fluor 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 Fluor 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 Fluor i.e., Fluor and British American go up and down completely randomly.

Pair Corralation between Fluor and British American

Considering the 90-day investment horizon Fluor is expected to under-perform the British American. But the stock apears to be less risky and, when comparing its historical volatility, Fluor is 1.03 times less risky than British American. The stock trades about -0.14 of its potential returns per unit of risk. The British American Tobacco is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,477  in British American Tobacco on December 29, 2024 and sell it today you would earn a total of  350.00  from holding British American Tobacco or generate 10.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Fluor  vs.  British American Tobacco

Fluor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fluor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

British American Tobacco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, British American reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fluor and British American

The main advantage of trading using opposite Fluor and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fluor 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.

The idea behind Fluor and British American Tobacco 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.