Correlation Between IMPERIAL TOBACCO and CSL

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

By analyzing existing cross correlation between IMPERIAL TOBACCO and CSL LTD SPONADR, you can compare the effects of market volatilities on IMPERIAL TOBACCO and CSL 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 IMPERIAL TOBACCO with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and CSL.

Diversification Opportunities for IMPERIAL TOBACCO and CSL

0.15

Correlation Coefficient

IMPERIAL TOBACCO  CSL

Average diversification

The 3 months correlation between IMPERIAL and CSL is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and CSL go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and CSL

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.65 times more return on investment than CSL. However, IMPERIAL TOBACCO is 1.53 times less risky than CSL. It trades about 0.16 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about 0.07 per unit of risk. If you would invest  3,161  in IMPERIAL TOBACCO on May 14, 2025 and sell it today you would earn a total of  323.00  from holding IMPERIAL TOBACCO or generate 10.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

IMPERIAL TOBACCO   vs.  CSL LTD SPONADR

IMPERIAL TOBACCO

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, IMPERIAL TOBACCO may actually be approaching a critical reversion point that can send shares even higher in September 2025.

CSL LTD SPONADR

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in CSL LTD SPONADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, CSL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IMPERIAL TOBACCO and CSL

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

The idea behind IMPERIAL TOBACCO and CSL LTD SPONADR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.