Correlation Between H FARM and BRIT AMER

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

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

Diversification Opportunities for H FARM and BRIT AMER

-0.72

Correlation Coefficient

H FARM  BRIT AMER

Pay attention - limited upside

The 3 months correlation between 5JQ and BRIT is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding H FARM SPA 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 H FARM 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 H FARM SPA 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 H FARM i.e., H FARM and BRIT AMER go up and down completely randomly.

Pair Corralation between H FARM and BRIT AMER

Assuming the 90 days horizon H FARM SPA is expected to generate 5.99 times more return on investment than BRIT AMER. However, H FARM is 5.99 times more volatile than BRIT AMER TOBACCO. It trades about 0.2 of its potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about -0.02 per unit of risk. If you would invest  10.00  in H FARM SPA on September 24, 2024 and sell it today you would earn a total of  2.00  from holding H FARM SPA or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

H FARM SPA  vs.  BRIT AMER TOBACCO

H FARM SPA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H FARM SPA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BRIT AMER TOBACCO

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BRIT AMER is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with H FARM and BRIT AMER

The main advantage of trading using opposite H FARM and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H FARM 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 H FARM SPA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.