Correlation Between IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2 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 LONDON STEXUNSPADRS1/2 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and LONDON STEXUNSPADRS12, you can compare the effects of market volatilities on IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2 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 LONDON STEXUNSPADRS1/2. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2.
Diversification Opportunities for IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between IMPERIAL and LONDON is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and LONDON STEXUNSPADRS12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LONDON STEXUNSPADRS1/2 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 LONDON STEXUNSPADRS1/2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LONDON STEXUNSPADRS1/2 has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2 go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.44 times more return on investment than LONDON STEXUNSPADRS1/2. However, IMPERIAL TOBACCO is 2.25 times less risky than LONDON STEXUNSPADRS1/2. It trades about 0.18 of its potential returns per unit of risk. LONDON STEXUNSPADRS12 is currently generating about 0.0 per unit of risk. If you would invest 3,016 in IMPERIAL TOBACCO on December 30, 2024 and sell it today you would earn a total of 338.00 from holding IMPERIAL TOBACCO or generate 11.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
IMPERIAL TOBACCO vs. LONDON STEXUNSPADRS12
Performance |
Timeline |
IMPERIAL TOBACCO |
LONDON STEXUNSPADRS1/2 |
IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2
The main advantage of trading using opposite IMPERIAL TOBACCO and LONDON STEXUNSPADRS1/2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, LONDON STEXUNSPADRS1/2 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 LONDON STEXUNSPADRS1/2 will offset losses from the drop in LONDON STEXUNSPADRS1/2's long position.IMPERIAL TOBACCO vs. VITEC SOFTWARE GROUP | IMPERIAL TOBACCO vs. United Microelectronics Corp | IMPERIAL TOBACCO vs. STORE ELECTRONIC | IMPERIAL TOBACCO vs. ASURE SOFTWARE |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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