Correlation Between ATHENE HOLDING and Imperial Brands

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

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

Diversification Opportunities for ATHENE HOLDING and Imperial Brands

0.93

Correlation Coefficient

ATHENE HOLDING  Imperial Brands

Almost no diversification

The 3 months correlation between ATHENE and Imperial is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ATHENE HOLDING PRFSERC 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 ATHENE HOLDING 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 ATHENE HOLDING PRFSERC 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 ATHENE HOLDING i.e., ATHENE HOLDING and Imperial Brands go up and down completely randomly.

Pair Corralation between ATHENE HOLDING and Imperial Brands

Assuming the 90 days trading horizon ATHENE HOLDING is expected to generate 2.36 times less return on investment than Imperial Brands. But when comparing it to its historical volatility, ATHENE HOLDING PRFSERC is 1.58 times less risky than Imperial Brands. It trades about 0.18 of its potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,588  in Imperial Brands PLC on September 23, 2024 and sell it today you would earn a total of  517.00  from holding Imperial Brands PLC or generate 19.98% return on investment over 90 days.

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

ATHENE HOLDING PRFSERC  vs.  Imperial Brands PLC

ATHENE HOLDING PRFSERC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATHENE HOLDING PRFSERC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ATHENE HOLDING may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Imperial Brands PLC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Imperial Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATHENE HOLDING and Imperial Brands

The main advantage of trading using opposite ATHENE HOLDING and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATHENE HOLDING 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 ATHENE HOLDING PRFSERC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.