Correlation Between Marwyn Value and British American

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

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

Diversification Opportunities for Marwyn Value and British American

-0.38

Correlation Coefficient

Marwyn Value  British American

Very good diversification

The 3 months correlation between Marwyn and British is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Marwyn Value Investors 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 Marwyn Value 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 Marwyn Value Investors 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 Marwyn Value i.e., Marwyn Value and British American go up and down completely randomly.

Pair Corralation between Marwyn Value and British American

Assuming the 90 days trading horizon Marwyn Value Investors is expected to under-perform the British American. But the stock apears to be less risky and, when comparing its historical volatility, Marwyn Value Investors is 1.36 times less risky than British American. The stock trades about -0.08 of its potential returns per unit of risk. The British American Tobacco is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  284,971  in British American Tobacco on September 5, 2024 and sell it today you would earn a total of  8,129  from holding British American Tobacco or generate 2.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Marwyn Value Investors  vs.  British American Tobacco

Marwyn Value Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marwyn Value Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Marwyn Value is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

British American Tobacco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, British American is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Marwyn Value and British American

The main advantage of trading using opposite Marwyn Value and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marwyn Value 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 Marwyn Value Investors 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.