Correlation Between BTG Hotels and Postal Savings

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

By analyzing existing cross correlation between BTG Hotels Group and Postal Savings Bank, you can compare the effects of market volatilities on BTG Hotels and Postal Savings 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 BTG Hotels with a short position of Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Hotels and Postal Savings.

Diversification Opportunities for BTG Hotels and Postal Savings

0.17

Correlation Coefficient

BTG Hotels  Postal Savings

Average diversification

The 3 months correlation between BTG and Postal is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding BTG Hotels Group and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank and BTG Hotels 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 BTG Hotels Group are associated (or correlated) with Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of BTG Hotels i.e., BTG Hotels and Postal Savings go up and down completely randomly.

Pair Corralation between BTG Hotels and Postal Savings

Assuming the 90 days trading horizon BTG Hotels Group is expected to generate 1.45 times more return on investment than Postal Savings. However, BTG Hotels is 1.45 times more volatile than Postal Savings Bank. It trades about -0.01 of its potential returns per unit of risk. Postal Savings Bank is currently generating about -0.05 per unit of risk. If you would invest  1,386  in BTG Hotels Group on October 20, 2024 and sell it today you would lose (32.00) from holding BTG Hotels Group or give up 2.31% of portfolio value over 90 days.

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

BTG Hotels Group  vs.  Postal Savings Bank

BTG Hotels Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BTG Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Postal Savings Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Postal Savings Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Postal Savings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BTG Hotels and Postal Savings

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

The idea behind BTG Hotels Group and Postal Savings Bank 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..