Correlation Between IMPERIAL TOBACCO and Intel

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

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

Diversification Opportunities for IMPERIAL TOBACCO and Intel

0.35

Correlation Coefficient

IMPERIAL TOBACCO  Intel

Weak diversification

The 3 months correlation between IMPERIAL and Intel is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Intel go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and Intel

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.23 times more return on investment than Intel. However, IMPERIAL TOBACCO is 4.43 times less risky than Intel. It trades about 0.18 of its potential returns per unit of risk. Intel is currently generating about 0.01 per unit of risk. If you would invest  3,050  in IMPERIAL TOBACCO on November 28, 2024 and sell it today you would earn a total of  264.00  from holding IMPERIAL TOBACCO or generate 8.66% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  Intel

IMPERIAL TOBACCO

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Intel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Intel is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IMPERIAL TOBACCO and Intel

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

The idea behind IMPERIAL TOBACCO and Intel 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..