Correlation Between Endeavour Mining and British American

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

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

Diversification Opportunities for Endeavour Mining and British American

0.71

Correlation Coefficient

Endeavour Mining  British American

Poor diversification

The 3 months correlation between Endeavour and British is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Endeavour Mining Corp 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 Endeavour Mining 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 Endeavour Mining Corp are associated (or correlated) with British American. 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 Endeavour Mining i.e., Endeavour Mining and British American go up and down completely randomly.

Pair Corralation between Endeavour Mining and British American

Assuming the 90 days trading horizon Endeavour Mining is expected to generate 3.68 times less return on investment than British American. In addition to that, Endeavour Mining is 1.71 times more volatile than British American Tobacco. It trades about 0.04 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.25 per unit of volatility. If you would invest  4,121  in British American Tobacco on April 17, 2025 and sell it today you would earn a total of  997.00  from holding British American Tobacco or generate 24.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Endeavour Mining Corp  vs.  British American Tobacco

Endeavour Mining Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Endeavour Mining Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Endeavour Mining is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

British American Tobacco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, British American unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Endeavour Mining and British American

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

The idea behind Endeavour Mining Corp 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.

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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 Valuation module to check real value of public entities based on technical and fundamental data.