Correlation Between Imperial Brands and Alstria Office

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

By analyzing existing cross correlation between Imperial Brands PLC and alstria office REIT AG, you can compare the effects of market volatilities on Imperial Brands and Alstria Office 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 Brands with a short position of Alstria Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Alstria Office.

Diversification Opportunities for Imperial Brands and Alstria Office

0.66

Correlation Coefficient

Imperial Brands  Alstria Office

Poor diversification

The 3 months correlation between Imperial and Alstria is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and alstria office REIT AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on alstria office REIT and Imperial Brands 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 Brands PLC are associated (or correlated) with Alstria Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of alstria office REIT has no effect on the direction of Imperial Brands i.e., Imperial Brands and Alstria Office go up and down completely randomly.

Pair Corralation between Imperial Brands and Alstria Office

Assuming the 90 days trading horizon Imperial Brands PLC is expected to generate 0.1 times more return on investment than Alstria Office. However, Imperial Brands PLC is 10.19 times less risky than Alstria Office. It trades about 0.11 of its potential returns per unit of risk. alstria office REIT AG is currently generating about -0.22 per unit of risk. If you would invest  3,104  in Imperial Brands PLC on October 10, 2024 and sell it today you would earn a total of  44.00  from holding Imperial Brands PLC or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Imperial Brands PLC  vs.  alstria office REIT AG

Imperial Brands PLC

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Imperial Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

alstria office REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days alstria office REIT AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Alstria Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Imperial Brands and Alstria Office

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

The idea behind Imperial Brands PLC and alstria office REIT AG 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.