Correlation Between British Amer and Gallaher Group

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

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

Diversification Opportunities for British Amer and Gallaher Group

0.0

Correlation Coefficient

British Amer  Gallaher Group

Pay attention - limited upside

The 3 months correlation between British and Gallaher is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Gallaher Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gallaher Group Plc and British Amer 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 British American Tobacco are associated (or correlated) with Gallaher Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gallaher Group Plc has no effect on the direction of British Amer i.e., British Amer and Gallaher Group go up and down completely randomly.

Pair Corralation between British Amer and Gallaher Group

If you would invest (100.00) in Gallaher Group Plc on January 20, 2024 and sell it today you would earn a total of  100.00  from holding Gallaher Group Plc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

British American Tobacco  vs.  Gallaher Group Plc

British American Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days British American Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Gallaher Group Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gallaher Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Gallaher Group is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with British Amer and Gallaher Group

The main advantage of trading using opposite British Amer and Gallaher Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, Gallaher Group 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 Gallaher Group will offset losses from the drop in Gallaher Group's long position.

The idea behind British American Tobacco and Gallaher Group Plc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.