Correlation Between Imperial Brands and 22nd Century

Can any of the company-specific risk be diversified away by investing in both Imperial Brands and 22nd Century 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 Imperial Brands and 22nd Century into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Imperial Brands PLC and 22nd Century Group, you can compare the effects of market volatilities on Imperial Brands and 22nd Century 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 Imperial Brands with a short position of 22nd Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and 22nd Century.

Diversification Opportunities for Imperial Brands and 22nd Century

-0.62

Correlation Coefficient

Imperial Brands  22nd Century

Excellent diversification

The 3 months correlation between Imperial and 22nd is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and 22nd Century Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 22nd Century Group and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with 22nd Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 22nd Century Group has no effect on the direction of Imperial Brands i.e., Imperial Brands and 22nd Century go up and down completely randomly.

Pair Corralation between Imperial Brands and 22nd Century

Assuming the 90 days horizon Imperial Brands PLC is expected to generate 0.13 times more return on investment than 22nd Century. However, Imperial Brands PLC is 7.51 times less risky than 22nd Century. It trades about 0.2 of its potential returns per unit of risk. 22nd Century Group is currently generating about -0.15 per unit of risk. If you would invest  2,870  in Imperial Brands PLC on August 30, 2024 and sell it today you would earn a total of  469.00  from holding Imperial Brands PLC or generate 16.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Imperial Brands PLC  vs.  22nd Century Group

Imperial Brands PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Imperial Brands showed solid returns over the last few months and may actually be approaching a breakup point.

22nd Century Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 22nd Century Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Imperial Brands and 22nd Century

The main advantage of trading using opposite Imperial Brands and 22nd Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, 22nd Century 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 22nd Century will offset losses from the drop in 22nd Century's long position.

The idea behind Imperial Brands PLC and 22nd Century Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .