Correlation Between Allan Gray and Bid

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

By analyzing existing cross correlation between Allan Gray Equity and Bid Corporation, you can compare the effects of market volatilities on Allan Gray and Bid 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 Allan Gray with a short position of Bid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allan Gray and Bid.

Diversification Opportunities for Allan Gray and Bid

0.21

Correlation Coefficient

Allan Gray  Bid

Modest diversification

The 3 months correlation between Allan and Bid is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Allan Gray Equity and Bid Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bid Corporation and Allan Gray 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 Allan Gray Equity are associated (or correlated) with Bid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bid Corporation has no effect on the direction of Allan Gray i.e., Allan Gray and Bid go up and down completely randomly.

Pair Corralation between Allan Gray and Bid

Assuming the 90 days trading horizon Allan Gray Equity is expected to generate 0.46 times more return on investment than Bid. However, Allan Gray Equity is 2.16 times less risky than Bid. It trades about 0.12 of its potential returns per unit of risk. Bid Corporation is currently generating about -0.01 per unit of risk. If you would invest  60,356  in Allan Gray Equity on December 24, 2024 and sell it today you would earn a total of  2,415  from holding Allan Gray Equity or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Allan Gray Equity  vs.  Bid Corp.

Allan Gray Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allan Gray Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong basic indicators, Allan Gray is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Bid Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bid Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allan Gray and Bid

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

The idea behind Allan Gray Equity and Bid Corporation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.