Correlation Between GLOBUS MEDICAL and British American

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

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

Diversification Opportunities for GLOBUS MEDICAL and British American

0.82

Correlation Coefficient

GLOBUS MEDICAL  British American

Very poor diversification

The 3 months correlation between GLOBUS and British is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding GLOBUS MEDICAL A and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco and GLOBUS MEDICAL 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 GLOBUS MEDICAL A are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of GLOBUS MEDICAL i.e., GLOBUS MEDICAL and British American go up and down completely randomly.

Pair Corralation between GLOBUS MEDICAL and British American

Assuming the 90 days trading horizon GLOBUS MEDICAL A is expected to generate 2.23 times more return on investment than British American. However, GLOBUS MEDICAL is 2.23 times more volatile than British American Tobacco. It trades about 0.16 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.09 per unit of risk. If you would invest  6,300  in GLOBUS MEDICAL A on September 23, 2024 and sell it today you would earn a total of  1,500  from holding GLOBUS MEDICAL A or generate 23.81% return on investment over 90 days.

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

GLOBUS MEDICAL A  vs.  British American Tobacco

GLOBUS MEDICAL A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBUS MEDICAL A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GLOBUS MEDICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

British American Tobacco

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, British American is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GLOBUS MEDICAL and British American

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

The idea behind GLOBUS MEDICAL A and British American 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.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.