Correlation Between BRIT AMER and PUBLIC STORAGE

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

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

Diversification Opportunities for BRIT AMER and PUBLIC STORAGE

-0.64

Correlation Coefficient

BRIT AMER  PUBLIC STORAGE

Excellent diversification

The 3 months correlation between BRIT and PUBLIC is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and PUBLIC STORAGE PRFO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC STORAGE PRFO and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with PUBLIC STORAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC STORAGE PRFO has no effect on the direction of BRIT AMER i.e., BRIT AMER and PUBLIC STORAGE go up and down completely randomly.

Pair Corralation between BRIT AMER and PUBLIC STORAGE

Assuming the 90 days trading horizon BRIT AMER is expected to generate 1.38 times less return on investment than PUBLIC STORAGE. In addition to that, BRIT AMER is 1.15 times more volatile than PUBLIC STORAGE PRFO. It trades about 0.01 of its total potential returns per unit of risk. PUBLIC STORAGE PRFO is currently generating about 0.02 per unit of volatility. If you would invest  1,421  in PUBLIC STORAGE PRFO on September 27, 2024 and sell it today you would earn a total of  139.00  from holding PUBLIC STORAGE PRFO or generate 9.78% return on investment over 90 days.

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

BRIT AMER TOBACCO  vs.  PUBLIC STORAGE PRFO

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

PUBLIC STORAGE PRFO

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BRIT AMER and PUBLIC STORAGE

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

The idea behind BRIT AMER TOBACCO and PUBLIC STORAGE PRFO 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.