Correlation Between Italtile and British Amer
Can any of the company-specific risk be diversified away by investing in both Italtile and British Amer 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 Italtile and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Italtile and British American Tobacco, you can compare the effects of market volatilities on Italtile and British Amer 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 Italtile with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Italtile and British Amer.
Diversification Opportunities for Italtile and British Amer
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Italtile and British is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Italtile and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and Italtile 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 Italtile are associated (or correlated) with British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Italtile i.e., Italtile and British Amer go up and down completely randomly.
Pair Corralation between Italtile and British Amer
Assuming the 90 days trading horizon Italtile is expected to generate 2.53 times more return on investment than British Amer. However, Italtile is 2.53 times more volatile than British American Tobacco. It trades about 0.05 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.06 per unit of risk. If you would invest 139,500 in Italtile on September 25, 2024 and sell it today you would earn a total of 2,300 from holding Italtile or generate 1.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Italtile vs. British American Tobacco
Performance |
Timeline |
Italtile |
British American Tobacco |
Italtile and British Amer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Italtile and British Amer
The main advantage of trading using opposite Italtile and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Italtile position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.Italtile vs. British American Tobacco | Italtile vs. Boxer Retail | Italtile vs. Bytes Technology | Italtile vs. Advtech |
British Amer vs. Aveng | British Amer vs. ABSA Bank Limited | British Amer vs. Datatec | British Amer vs. We Buy Cars |
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.
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