Correlation Between BTG Hotels and GRINM Semiconductor

Can any of the company-specific risk be diversified away by investing in both BTG Hotels and GRINM Semiconductor 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 GRINM Semiconductor 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 GRINM Semiconductor Materials, you can compare the effects of market volatilities on BTG Hotels and GRINM Semiconductor 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 GRINM Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Hotels and GRINM Semiconductor.

Diversification Opportunities for BTG Hotels and GRINM Semiconductor

0.9

Correlation Coefficient

BTG Hotels  GRINM Semiconductor

Almost no diversification

The 3 months correlation between BTG and GRINM is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BTG Hotels Group and GRINM Semiconductor Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GRINM Semiconductor 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 GRINM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GRINM Semiconductor has no effect on the direction of BTG Hotels i.e., BTG Hotels and GRINM Semiconductor go up and down completely randomly.

Pair Corralation between BTG Hotels and GRINM Semiconductor

Assuming the 90 days trading horizon BTG Hotels is expected to generate 1.13 times less return on investment than GRINM Semiconductor. But when comparing it to its historical volatility, BTG Hotels Group is 1.63 times less risky than GRINM Semiconductor. It trades about 0.22 of its potential returns per unit of risk. GRINM Semiconductor Materials is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  875.00  in GRINM Semiconductor Materials on September 13, 2024 and sell it today you would earn a total of  378.00  from holding GRINM Semiconductor Materials or generate 43.2% return on investment over 90 days.

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

BTG Hotels Group  vs.  GRINM Semiconductor Materials

BTG Hotels Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTG Hotels Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BTG Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

GRINM Semiconductor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GRINM Semiconductor Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GRINM Semiconductor sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BTG Hotels and GRINM Semiconductor

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

The idea behind BTG Hotels Group and GRINM Semiconductor Materials 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.