Correlation Between Grand Havana and Associated British

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

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

Diversification Opportunities for Grand Havana and Associated British

0.28

Correlation Coefficient

Grand Havana  Associated British

Modest diversification

The 3 months correlation between Grand and Associated is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Grand Havana and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Grand Havana 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 Grand Havana are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Grand Havana i.e., Grand Havana and Associated British go up and down completely randomly.

Pair Corralation between Grand Havana and Associated British

Given the investment horizon of 90 days Grand Havana is expected to generate 5.95 times more return on investment than Associated British. However, Grand Havana is 5.95 times more volatile than Associated British Foods. It trades about 0.0 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.25 per unit of risk. If you would invest  0.07  in Grand Havana on October 6, 2024 and sell it today you would lose (0.01) from holding Grand Havana or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.35%
Values	Daily Returns

Grand Havana  vs.  Associated British Foods

Grand Havana

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Havana are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Grand Havana showed solid returns over the last few months and may actually be approaching a breakup point.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grand Havana and Associated British

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

The idea behind Grand Havana and Associated British Foods 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.