Correlation Between BBAI WT and System1

Can any of the company-specific risk be diversified away by investing in both BBAI WT and System1 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 BBAI WT and System1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BBAI WT and System1, you can compare the effects of market volatilities on BBAI WT and System1 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 BBAI WT with a short position of System1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBAI WT and System1.

Diversification Opportunities for BBAI WT and System1

-0.75

Correlation Coefficient

BBAI WT  System1

Pay attention - limited upside

The 3 months correlation between BBAI and System1 is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding BBAI WT and System1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System1 and BBAI WT 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 BBAI WT are associated (or correlated) with System1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System1 has no effect on the direction of BBAI WT i.e., BBAI WT and System1 go up and down completely randomly.

Pair Corralation between BBAI WT and System1

Assuming the 90 days trading horizon BBAI WT is expected to generate 4.23 times more return on investment than System1. However, BBAI WT is 4.23 times more volatile than System1. It trades about 0.26 of its potential returns per unit of risk. System1 is currently generating about -0.11 per unit of risk. If you would invest  14.00  in BBAI WT on September 21, 2024 and sell it today you would earn a total of  86.00  from holding BBAI WT or generate 614.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

BBAI WT  vs.  System1

BBAI WT

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BBAI WT are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BBAI WT unveiled solid returns over the last few months and may actually be approaching a breakup point.

System1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days System1 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with BBAI WT and System1

The main advantage of trading using opposite BBAI WT and System1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBAI WT position performs unexpectedly, System1 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 System1 will offset losses from the drop in System1's long position.

The idea behind BBAI WT and System1 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.