Correlation Between Humble Fume and British Amer

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

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

Diversification Opportunities for Humble Fume and British Amer

0.71

Correlation Coefficient

Humble Fume  British Amer

Poor diversification

The 3 months correlation between Humble and British is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Humble Fume 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 Humble Fume 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 Humble Fume are associated (or correlated) with British Amer. 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 Humble Fume i.e., Humble Fume and British Amer go up and down completely randomly.

Pair Corralation between Humble Fume and British Amer

If you would invest  3,725  in British American Tobacco on September 2, 2024 and sell it today you would earn a total of  69.00  from holding British American Tobacco or generate 1.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Humble Fume  vs.  British American Tobacco

Humble Fume

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humble Fume has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Humble Fume is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Humble Fume and British Amer

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

The idea behind Humble Fume 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.