Correlation Between Teladoc Health and British American

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

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

Diversification Opportunities for Teladoc Health and British American

0.78

Correlation Coefficient

Teladoc Health  British American

Poor diversification

The 3 months correlation between Teladoc and British is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Teladoc Health 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 Teladoc Health 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 Teladoc Health 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 Teladoc Health i.e., Teladoc Health and British American go up and down completely randomly.

Pair Corralation between Teladoc Health and British American

Assuming the 90 days trading horizon Teladoc Health is expected to generate 3.34 times more return on investment than British American. However, Teladoc Health is 3.34 times more volatile than British American Tobacco. It trades about 0.07 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.1 per unit of risk. If you would invest  162.00  in Teladoc Health on September 24, 2024 and sell it today you would earn a total of  28.00  from holding Teladoc Health or generate 17.28% return on investment over 90 days.

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

Teladoc Health  vs.  British American Tobacco

Teladoc Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Teladoc Health sustained solid returns over the last few months and may actually be approaching a breakup point.

British American Tobacco

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, British American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Teladoc Health and British American

The main advantage of trading using opposite Teladoc Health and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teladoc Health 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 Teladoc Health 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.