Correlation Between British Amer and Coronation Global

Can any of the company-specific risk be diversified away by investing in both British Amer and Coronation Global 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 British Amer and Coronation Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between British American Tobacco and Coronation Global Equity, you can compare the effects of market volatilities on British Amer and Coronation Global 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 British Amer with a short position of Coronation Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Coronation Global.

Diversification Opportunities for British Amer and Coronation Global

0.26

Correlation Coefficient

British Amer  Coronation Global

Modest diversification

The 3 months correlation between British and Coronation is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Coronation Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coronation Global Equity and British 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 British American Tobacco are associated (or correlated) with Coronation Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coronation Global Equity has no effect on the direction of British Amer i.e., British Amer and Coronation Global go up and down completely randomly.

Pair Corralation between British Amer and Coronation Global

Assuming the 90 days trading horizon British Amer is expected to generate 4.87 times less return on investment than Coronation Global. In addition to that, British Amer is 1.09 times more volatile than Coronation Global Equity. It trades about 0.05 of its total potential returns per unit of risk. Coronation Global Equity is currently generating about 0.29 per unit of volatility. If you would invest  218.00  in Coronation Global Equity on September 4, 2024 and sell it today you would earn a total of  46.00  from holding Coronation Global Equity or generate 21.1% return on investment over 90 days.

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

British American Tobacco  vs.  Coronation Global Equity

British American Tobacco

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, British Amer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Coronation Global Equity

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coronation Global Equity are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, Coronation Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with British Amer and Coronation Global

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

The idea behind British American Tobacco and Coronation Global Equity 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.