Correlation Between Meta Data and British Amer

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Can any of the company-specific risk be diversified away by investing in both Meta Data 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 Meta Data and British Amer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Data and British American Tobacco, you can compare the effects of market volatilities on Meta Data 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 Meta Data with a short position of British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Data and British Amer.

Diversification Opportunities for Meta Data and British Amer

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Meta and British is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Meta Data 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 Meta Data 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 Meta Data 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 Meta Data i.e., Meta Data and British Amer go up and down completely randomly.

Pair Corralation between Meta Data and British Amer

Considering the 90-day investment horizon Meta Data is expected to under-perform the British Amer. In addition to that, Meta Data is 3.12 times more volatile than British American Tobacco. It trades about -0.02 of its total potential returns per unit of risk. British American Tobacco is currently generating about -0.02 per unit of volatility. If you would invest  3,676  in British American Tobacco on December 19, 2023 and sell it today you would lose (569.00) from holding British American Tobacco or give up 15.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Meta Data  vs.  British American Tobacco

 Performance 
       Timeline  
Meta Data 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Meta Data has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
British American Tobacco 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Meta Data and British Amer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Meta Data and British Amer

The main advantage of trading using opposite Meta Data and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Data 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 Meta Data 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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