Correlation Between IMPERIAL TOBACCO and Wayside Technology

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

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

Diversification Opportunities for IMPERIAL TOBACCO and Wayside Technology

-0.48

Correlation Coefficient

IMPERIAL TOBACCO  Wayside Technology

Very good diversification

The 3 months correlation between IMPERIAL and Wayside is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Wayside Technology go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and Wayside Technology

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.29 times more return on investment than Wayside Technology. However, IMPERIAL TOBACCO is 3.5 times less risky than Wayside Technology. It trades about 0.13 of its potential returns per unit of risk. Wayside Technology Group is currently generating about -0.06 per unit of risk. If you would invest  3,035  in IMPERIAL TOBACCO on December 24, 2024 and sell it today you would earn a total of  205.00  from holding IMPERIAL TOBACCO or generate 6.75% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  Wayside Technology Group

IMPERIAL TOBACCO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, IMPERIAL TOBACCO may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Wayside Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wayside Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with IMPERIAL TOBACCO and Wayside Technology

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

The idea behind IMPERIAL TOBACCO and Wayside Technology Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.