Correlation Between IMPERIAL TOBACCO and Neinor Homes

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

By analyzing existing cross correlation between IMPERIAL TOBACCO and Neinor Homes SA, you can compare the effects of market volatilities on IMPERIAL TOBACCO and Neinor Homes 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 IMPERIAL TOBACCO with a short position of Neinor Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Neinor Homes.

Diversification Opportunities for IMPERIAL TOBACCO and Neinor Homes

0.45

Correlation Coefficient

IMPERIAL TOBACCO  Neinor Homes

Very weak diversification

The 3 months correlation between IMPERIAL and Neinor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Neinor Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SA and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SA has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Neinor Homes go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and Neinor Homes

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.5 times more return on investment than Neinor Homes. However, IMPERIAL TOBACCO is 2.02 times less risky than Neinor Homes. It trades about 0.23 of its potential returns per unit of risk. Neinor Homes SA is currently generating about 0.08 per unit of risk. If you would invest  3,036  in IMPERIAL TOBACCO on December 1, 2024 and sell it today you would earn a total of  348.00  from holding IMPERIAL TOBACCO or generate 11.46% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  Neinor Homes SA

IMPERIAL TOBACCO

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, IMPERIAL TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Neinor Homes SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Neinor Homes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IMPERIAL TOBACCO and Neinor Homes

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

The idea behind IMPERIAL TOBACCO and Neinor Homes SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.