Correlation Between BCM Resources and Diamond Estates

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

By analyzing existing cross correlation between BCM Resources Corp and Diamond Estates Wines, you can compare the effects of market volatilities on BCM Resources and Diamond Estates 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 BCM Resources with a short position of Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCM Resources and Diamond Estates.

Diversification Opportunities for BCM Resources and Diamond Estates

-0.22

Correlation Coefficient

BCM Resources  Diamond Estates

Very good diversification

The 3 months correlation between BCM and Diamond is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding BCM Resources Corp and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines and BCM Resources 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 BCM Resources Corp are associated (or correlated) with Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of BCM Resources i.e., BCM Resources and Diamond Estates go up and down completely randomly.

Pair Corralation between BCM Resources and Diamond Estates

Considering the 90-day investment horizon BCM Resources Corp is expected to generate 2.06 times more return on investment than Diamond Estates. However, BCM Resources is 2.06 times more volatile than Diamond Estates Wines. It trades about 0.1 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.13 per unit of risk. If you would invest  4.00  in BCM Resources Corp on October 26, 2024 and sell it today you would earn a total of  1.50  from holding BCM Resources Corp or generate 37.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

BCM Resources Corp  vs.  Diamond Estates Wines

BCM Resources Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCM Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BCM Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with BCM Resources and Diamond Estates

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

The idea behind BCM Resources Corp and Diamond Estates Wines 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.