Correlation Between IMPERIAL TOBACCO and WillScot Mobile

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

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

Diversification Opportunities for IMPERIAL TOBACCO and WillScot Mobile

0.2

Correlation Coefficient

IMPERIAL TOBACCO  WillScot Mobile

Modest diversification

The 3 months correlation between IMPERIAL and WillScot is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and WillScot Mobile Mini in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WillScot Mobile Mini 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 WillScot Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WillScot Mobile Mini has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and WillScot Mobile go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and WillScot Mobile

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.32 times more return on investment than WillScot Mobile. However, IMPERIAL TOBACCO is 3.14 times less risky than WillScot Mobile. It trades about 0.23 of its potential returns per unit of risk. WillScot Mobile Mini is currently generating about -0.08 per unit of risk. If you would invest  3,036  in IMPERIAL TOBACCO on December 2, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

IMPERIAL TOBACCO   vs.  WillScot Mobile Mini

IMPERIAL TOBACCO

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 17 (%) 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.

WillScot Mobile Mini

Risk-Adjusted Performance

Very Weak

Over the last 90 days WillScot Mobile Mini has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with IMPERIAL TOBACCO and WillScot Mobile

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

The idea behind IMPERIAL TOBACCO and WillScot Mobile Mini 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.