Correlation Between Turning Point and Imperial Brands
Can any of the company-specific risk be diversified away by investing in both Turning Point and Imperial Brands 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 Turning Point and Imperial Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Turning Point Brands and Imperial Brands PLC, you can compare the effects of market volatilities on Turning Point and Imperial Brands 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 Turning Point with a short position of Imperial Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Imperial Brands.
Diversification Opportunities for Turning Point and Imperial Brands
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Turning and Imperial is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Imperial Brands PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Brands PLC and Turning Point 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 Turning Point Brands are associated (or correlated) with Imperial Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Brands PLC has no effect on the direction of Turning Point i.e., Turning Point and Imperial Brands go up and down completely randomly.
Pair Corralation between Turning Point and Imperial Brands
Considering the 90-day investment horizon Turning Point Brands is expected to generate 2.84 times more return on investment than Imperial Brands. However, Turning Point is 2.84 times more volatile than Imperial Brands PLC. It trades about 0.3 of its potential returns per unit of risk. Imperial Brands PLC is currently generating about 0.26 per unit of risk. If you would invest 2,746 in Turning Point Brands on February 5, 2024 and sell it today you would earn a total of 527.00 from holding Turning Point Brands or generate 19.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Turning Point Brands vs. Imperial Brands PLC
Performance |
Timeline |
Turning Point Brands |
Imperial Brands PLC |
Turning Point and Imperial Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Turning Point and Imperial Brands
The main advantage of trading using opposite Turning Point and Imperial Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Turning Point position performs unexpectedly, Imperial Brands 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 Imperial Brands will offset losses from the drop in Imperial Brands' long position.Turning Point vs. Universal | Turning Point vs. Imperial Brands PLC | Turning Point vs. Japan Tobacco ADR | Turning Point vs. Imperial Brands PLC |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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