Correlation Between Pyxus International and Imperial Brands

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

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

Diversification Opportunities for Pyxus International and Imperial Brands

0.81

Correlation Coefficient

Pyxus International  Imperial Brands

Very poor diversification

The 3 months correlation between Pyxus and Imperial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pyxus International and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC and Pyxus International 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 Pyxus International are associated (or correlated) with Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Pyxus International i.e., Pyxus International and Imperial Brands go up and down completely randomly.

Pair Corralation between Pyxus International and Imperial Brands

Given the investment horizon of 90 days Pyxus International is expected to generate 6.79 times more return on investment than Imperial Brands. However, Pyxus International is 6.79 times more volatile than Imperial Brands PLC. It trades about 0.11 of its potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.23 per unit of risk. If you would invest  288.00  in Pyxus International on December 29, 2024 and sell it today you would earn a total of  113.00  from holding Pyxus International or generate 39.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Pyxus International  vs.  Imperial Brands PLC

Pyxus International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pyxus International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Pyxus International showed solid returns over the last few months and may actually be approaching a breakup point.

Imperial Brands PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Imperial Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pyxus International and Imperial Brands

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

The idea behind Pyxus International and Imperial Brands PLC 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.