Correlation Between Safari Investments and British Amer

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

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

Diversification Opportunities for Safari Investments and British Amer

-0.45

Correlation Coefficient

Safari Investments  British Amer

Very good diversification

The 3 months correlation between Safari and British is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Safari Investments RSA 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 Safari Investments 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 Safari Investments RSA 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 Safari Investments i.e., Safari Investments and British Amer go up and down completely randomly.

Pair Corralation between Safari Investments and British Amer

Assuming the 90 days trading horizon Safari Investments RSA is expected to generate 2.38 times more return on investment than British Amer. However, Safari Investments is 2.38 times more volatile than British American Tobacco. It trades about 0.1 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.07 per unit of risk. If you would invest  54,100  in Safari Investments RSA on September 1, 2024 and sell it today you would earn a total of  8,400  from holding Safari Investments RSA or generate 15.53% return on investment over 90 days.

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

Safari Investments RSA  vs.  British American Tobacco

Safari Investments RSA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safari Investments RSA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Safari Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

British American Tobacco

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, British Amer is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Safari Investments and British Amer

The main advantage of trading using opposite Safari Investments and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safari Investments 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 Safari Investments RSA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.