Correlation Between SAFETY MEDICAL and BRIT AMER

Can any of the company-specific risk be diversified away by investing in both SAFETY MEDICAL and BRIT 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 SAFETY MEDICAL and BRIT AMER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SAFETY MEDICAL PROD and BRIT AMER TOBACCO, you can compare the effects of market volatilities on SAFETY MEDICAL and BRIT 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 SAFETY MEDICAL with a short position of BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAFETY MEDICAL and BRIT AMER.

Diversification Opportunities for SAFETY MEDICAL and BRIT AMER

-0.96

Correlation Coefficient

SAFETY MEDICAL  BRIT AMER

Pay attention - limited upside

The 3 months correlation between SAFETY and BRIT is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding SAFETY MEDICAL PROD and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO and SAFETY MEDICAL 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 SAFETY MEDICAL PROD are associated (or correlated) with BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of SAFETY MEDICAL i.e., SAFETY MEDICAL and BRIT AMER go up and down completely randomly.

Pair Corralation between SAFETY MEDICAL and BRIT AMER

Assuming the 90 days trading horizon SAFETY MEDICAL PROD is expected to under-perform the BRIT AMER. In addition to that, SAFETY MEDICAL is 2.2 times more volatile than BRIT AMER TOBACCO. It trades about -0.2 of its total potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.16 per unit of volatility. If you would invest  2,826  in BRIT AMER TOBACCO on October 7, 2024 and sell it today you would earn a total of  758.00  from holding BRIT AMER TOBACCO or generate 26.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	92.0%
Values	Daily Returns

SAFETY MEDICAL PROD  vs.  BRIT AMER TOBACCO

SAFETY MEDICAL PROD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAFETY MEDICAL PROD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, SAFETY MEDICAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BRIT AMER TOBACCO

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BRIT AMER unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SAFETY MEDICAL and BRIT AMER

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

The idea behind SAFETY MEDICAL PROD and BRIT AMER TOBACCO 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.