Correlation Between British Amer and Kaival Brands

Can any of the company-specific risk be diversified away by investing in both British Amer and Kaival 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 British Amer and Kaival Brands 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 Kaival Brands Innovations, you can compare the effects of market volatilities on British Amer and Kaival 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 British Amer with a short position of Kaival Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Kaival Brands.

Diversification Opportunities for British Amer and Kaival Brands

-0.31

Correlation Coefficient

British Amer  Kaival Brands

Very good diversification

The 3 months correlation between British and Kaival is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Kaival Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaival Brands Innovations 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 Kaival Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaival Brands Innovations has no effect on the direction of British Amer i.e., British Amer and Kaival Brands go up and down completely randomly.

Pair Corralation between British Amer and Kaival Brands

Considering the 90-day investment horizon British American Tobacco is expected to under-perform the Kaival Brands. But the stock apears to be less risky and, when comparing its historical volatility, British American Tobacco is 12.22 times less risky than Kaival Brands. The stock trades about -0.02 of its potential returns per unit of risk. The Kaival Brands Innovations is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,302  in Kaival Brands Innovations on January 24, 2024 and sell it today you would lose (956.00) from holding Kaival Brands Innovations or give up 73.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

British American Tobacco  vs.  Kaival Brands Innovations

British American Tobacco

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 2 (%) 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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Kaival Brands Innovations

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kaival Brands Innovations are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Kaival Brands disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with British Amer and Kaival Brands

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

The idea behind British American Tobacco and Kaival Brands Innovations 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.