Correlation Between Getlink SE and IMPERIAL TOBACCO

Can any of the company-specific risk be diversified away by investing in both Getlink SE and IMPERIAL TOBACCO 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 Getlink SE and IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Getlink SE and IMPERIAL TOBACCO

-0.5

Correlation Coefficient

Getlink SE  IMPERIAL TOBACCO

Very good diversification

The 3 months correlation between Getlink and IMPERIAL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Getlink SE and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and Getlink SE 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 Getlink SE are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of Getlink SE i.e., Getlink SE and IMPERIAL TOBACCO go up and down completely randomly.

Pair Corralation between Getlink SE and IMPERIAL TOBACCO

Assuming the 90 days trading horizon Getlink SE is expected to generate 11.48 times less return on investment than IMPERIAL TOBACCO. In addition to that, Getlink SE is 1.08 times more volatile than IMPERIAL TOBACCO . It trades about 0.01 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.08 per unit of volatility. If you would invest  2,042  in IMPERIAL TOBACCO on October 5, 2024 and sell it today you would earn a total of  1,053  from holding IMPERIAL TOBACCO or generate 51.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Getlink SE  vs.  IMPERIAL TOBACCO

Getlink SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

IMPERIAL TOBACCO

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days IMPERIAL TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Getlink SE and IMPERIAL TOBACCO

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

The idea behind Getlink SE and IMPERIAL 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.