Correlation Between Gold Fields and British Amer

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

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

Diversification Opportunities for Gold Fields and British Amer

0.77

Correlation Coefficient

Gold Fields  British Amer

Poor diversification

The 3 months correlation between Gold and British is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields 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 Gold Fields 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 Gold Fields are associated (or correlated) with British Amer. 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 Gold Fields i.e., Gold Fields and British Amer go up and down completely randomly.

Pair Corralation between Gold Fields and British Amer

Assuming the 90 days trading horizon Gold Fields is expected to generate 1.58 times more return on investment than British Amer. However, Gold Fields is 1.58 times more volatile than British American Tobacco. It trades about 0.33 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.12 per unit of risk. If you would invest  2,434,279  in Gold Fields on December 30, 2024 and sell it today you would earn a total of  1,655,621  from holding Gold Fields or generate 68.01% return on investment over 90 days.

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

Gold Fields  vs.  British American Tobacco

Gold Fields

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Gold Fields exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gold Fields and British Amer

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

The idea behind Gold Fields 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 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..