Correlation Between British Amer and ATAI Life

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Can any of the company-specific risk be diversified away by investing in both British Amer and ATAI Life 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 ATAI Life 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 ATAI Life Sciences, you can compare the effects of market volatilities on British Amer and ATAI Life 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 ATAI Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and ATAI Life.

Diversification Opportunities for British Amer and ATAI Life

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between British and ATAI Life is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and ATAI Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATAI Life Sciences 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 ATAI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATAI Life Sciences has no effect on the direction of British Amer i.e., British Amer and ATAI Life go up and down completely randomly.

Pair Corralation between British Amer and ATAI Life

Considering the 90-day investment horizon British Amer is expected to generate 1.72 times less return on investment than ATAI Life. But when comparing it to its historical volatility, British American Tobacco is 5.93 times less risky than ATAI Life. It trades about 0.62 of its potential returns per unit of risk. ATAI Life Sciences is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  298.00  in ATAI Life Sciences on September 4, 2022 and sell it today you would earn a total of  57.00  from holding ATAI Life Sciences or generate 19.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

British American Tobacco  vs.  ATAI Life Sciences

 Performance (%) 
       Timeline  
British American Tobacco 
British Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, British Amer may actually be approaching a critical reversion point that can send shares even higher in January 2023.

British Price Channel

ATAI Life Sciences 
ATAI Life Performance
0 of 100
Over the last 90 days ATAI Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ATAI Life Price Channel

British Amer and ATAI Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with British Amer and ATAI Life

The main advantage of trading using opposite British Amer and ATAI Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer position performs unexpectedly, ATAI Life 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 ATAI Life will offset losses from the drop in ATAI Life's long position.
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The idea behind British American Tobacco and ATAI Life Sciences 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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