Correlation Between Kap Industrial and British Amer
Can any of the company-specific risk be diversified away by investing in both Kap Industrial 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 Kap Industrial and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kap Industrial Holdings and British American Tobacco, you can compare the effects of market volatilities on Kap Industrial 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 Kap Industrial with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kap Industrial and British Amer.
Diversification Opportunities for Kap Industrial and British Amer
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kap and British is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial Holdings 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 Kap Industrial 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 Kap Industrial Holdings 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 Kap Industrial i.e., Kap Industrial and British Amer go up and down completely randomly.
Pair Corralation between Kap Industrial and British Amer
Assuming the 90 days trading horizon Kap Industrial Holdings is expected to under-perform the British Amer. In addition to that, Kap Industrial is 1.73 times more volatile than British American Tobacco. It trades about -0.11 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.07 per unit of volatility. If you would invest 6,734,811 in British American Tobacco on December 2, 2024 and sell it today you would earn a total of 454,789 from holding British American Tobacco or generate 6.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Kap Industrial Holdings vs. British American Tobacco
Performance |
Timeline |
Kap Industrial Holdings |
British American Tobacco |
Kap Industrial and British Amer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kap Industrial and British Amer
The main advantage of trading using opposite Kap Industrial and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial 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.Kap Industrial vs. RCL Foods | Kap Industrial vs. Standard Bank Group | Kap Industrial vs. Astral Foods | Kap Industrial vs. Harmony Gold Mining |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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