Correlation Between BC IRON and PUBLIC STORAGE

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

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

Diversification Opportunities for BC IRON and PUBLIC STORAGE

0.78

Correlation Coefficient

BC IRON  PUBLIC STORAGE

Poor diversification

The 3 months correlation between BC3 and PUBLIC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON and PUBLIC STORAGE PRFO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC STORAGE PRFO and BC IRON 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 BC IRON are associated (or correlated) with PUBLIC STORAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC STORAGE PRFO has no effect on the direction of BC IRON i.e., BC IRON and PUBLIC STORAGE go up and down completely randomly.

Pair Corralation between BC IRON and PUBLIC STORAGE

Assuming the 90 days trading horizon BC IRON is expected to generate 1.18 times less return on investment than PUBLIC STORAGE. In addition to that, BC IRON is 2.67 times more volatile than PUBLIC STORAGE PRFO. It trades about 0.02 of its total potential returns per unit of risk. PUBLIC STORAGE PRFO is currently generating about 0.05 per unit of volatility. If you would invest  1,606  in PUBLIC STORAGE PRFO on October 8, 2024 and sell it today you would earn a total of  14.00  from holding PUBLIC STORAGE PRFO or generate 0.87% return on investment over 90 days.

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

BC IRON  vs.  PUBLIC STORAGE PRFO

BC IRON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BC IRON is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PUBLIC STORAGE PRFO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC STORAGE PRFO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PUBLIC STORAGE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BC IRON and PUBLIC STORAGE

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

The idea behind BC IRON and PUBLIC STORAGE PRFO 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.