Correlation Between Reynolds American and Gallaher Group

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

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

Diversification Opportunities for Reynolds American and Gallaher Group

0.0

Correlation Coefficient

Reynolds American  Gallaher Group

Pay attention - limited upside

The 3 months correlation between Reynolds and Gallaher is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Reynolds American 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 Reynolds American 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 Reynolds American 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 Reynolds American i.e., Reynolds American and Gallaher Group go up and down completely randomly.

Pair Corralation between Reynolds American and Gallaher Group

If you would invest  0.00  in Gallaher Group Plc on January 25, 2024 and sell it today you would earn a total of  0.00  from holding Gallaher Group Plc or generate 0.0% return on investment over 90 days.

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

Reynolds American  vs.  Gallaher Group Plc

Reynolds American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reynolds American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Reynolds American is not utilizing all of its potentials. The recent 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 Reynolds American and Gallaher Group

The main advantage of trading using opposite Reynolds American and Gallaher Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reynolds American 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 Reynolds American 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.