Correlation Between British Amer and Pyxus International

Can any of the company-specific risk be diversified away by investing in both British Amer and Pyxus International 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 Pyxus International 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 Pyxus International, you can compare the effects of market volatilities on British Amer and Pyxus International 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 Pyxus International. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Pyxus International.

Diversification Opportunities for British Amer and Pyxus International

0.02

Correlation Coefficient

British Amer  Pyxus International

Significant diversification

The 3 months correlation between British and Pyxus is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Pyxus International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pyxus International 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 Pyxus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pyxus International has no effect on the direction of British Amer i.e., British Amer and Pyxus International go up and down completely randomly.

Pair Corralation between British Amer and Pyxus International

Considering the 90-day investment horizon British Amer is expected to generate 19.07 times less return on investment than Pyxus International. But when comparing it to its historical volatility, British American Tobacco is 10.51 times less risky than Pyxus International. It trades about 0.03 of its potential returns per unit of risk. Pyxus International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Pyxus International on September 19, 2024 and sell it today you would lose (1.00) from holding Pyxus International or give up 0.34% of portfolio value over 90 days.

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

British American Tobacco  vs.  Pyxus International

British American Tobacco

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pyxus International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pyxus International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pyxus International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with British Amer and Pyxus International

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

The idea behind British American Tobacco and Pyxus International 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.