Correlation Between BC Bud and West Island

Can any of the company-specific risk be diversified away by investing in both BC Bud and West Island 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 West Island 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 West Island Brands, you can compare the effects of market volatilities on BC Bud and West Island 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 West Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of BC Bud and West Island.

Diversification Opportunities for BC Bud and West Island

0.0

Correlation Coefficient

BC Bud  West Island

Pay attention - limited upside

The 3 months correlation between BCBCF and West is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The BC Bud and West Island Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Island Brands 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 West Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Island Brands has no effect on the direction of BC Bud i.e., BC Bud and West Island go up and down completely randomly.

Pair Corralation between BC Bud and West Island

Assuming the 90 days horizon BC Bud is expected to generate 7.31 times less return on investment than West Island. But when comparing it to its historical volatility, The BC Bud is 4.13 times less risky than West Island. It trades about 0.05 of its potential returns per unit of risk. West Island Brands is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7.80  in West Island Brands on September 29, 2024 and sell it today you would lose (7.45) from holding West Island Brands or give up 95.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

The BC Bud  vs.  West Island Brands

BC Bud

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The BC Bud are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, BC Bud reported solid returns over the last few months and may actually be approaching a breakup point.

West Island Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West Island Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, West Island is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BC Bud and West Island

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

The idea behind The BC Bud and West Island Brands 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.