Correlation Between HALI34 and British American

Can any of the company-specific risk be diversified away by investing in both HALI34 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 HALI34 and British American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HALI34 and British American Tobacco, you can compare the effects of market volatilities on HALI34 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 HALI34 with a short position of British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of HALI34 and British American.

Diversification Opportunities for HALI34 and British American

0.87

Correlation Coefficient

HALI34  British American

Very poor diversification

The 3 months correlation between HALI34 and British is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding HALI34 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 HALI34 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 HALI34 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 HALI34 i.e., HALI34 and British American go up and down completely randomly.

Pair Corralation between HALI34 and British American

Assuming the 90 days trading horizon HALI34 is expected to under-perform the British American. In addition to that, HALI34 is 2.52 times more volatile than British American Tobacco. It trades about -0.14 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of volatility. If you would invest  4,283  in British American Tobacco on September 23, 2024 and sell it today you would earn a total of  129.00  from holding British American Tobacco or generate 3.01% return on investment over 90 days.

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

HALI34  vs.  British American Tobacco

HALI34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HALI34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, HALI34 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

British American Tobacco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, British American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HALI34 and British American

The main advantage of trading using opposite HALI34 and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HALI34 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 HALI34 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.