Correlation Between BC Bud and Target

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

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

Diversification Opportunities for BC Bud and Target

-0.49

Correlation Coefficient

BC Bud  Target

Very good diversification

The 3 months correlation between BCBCF and Target is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding The BC Bud and Target Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Group and BC Bud 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 The BC Bud are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Group has no effect on the direction of BC Bud i.e., BC Bud and Target go up and down completely randomly.

Pair Corralation between BC Bud and Target

Assuming the 90 days horizon The BC Bud is expected to generate 0.81 times more return on investment than Target. However, The BC Bud is 1.23 times less risky than Target. It trades about 0.22 of its potential returns per unit of risk. Target Group is currently generating about 0.02 per unit of risk. If you would invest  5.40  in The BC Bud on September 15, 2024 and sell it today you would earn a total of  3.38  from holding The BC Bud or generate 62.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

The BC Bud  vs.  Target Group

BC Bud

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

Target Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Target Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Target showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BC Bud and Target

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

The idea behind The BC Bud and Target Group 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.