Correlation Between BCB Bancorp and Analog Devices

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

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

Diversification Opportunities for BCB Bancorp and Analog Devices

-0.46

Correlation Coefficient

BCB Bancorp  Analog Devices

Very good diversification

The 3 months correlation between BCB and Analog is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding BCB Bancorp and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and BCB Bancorp 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 BCB Bancorp are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of BCB Bancorp i.e., BCB Bancorp and Analog Devices go up and down completely randomly.

Pair Corralation between BCB Bancorp and Analog Devices

Given the investment horizon of 90 days BCB Bancorp is expected to generate 1.13 times more return on investment than Analog Devices. However, BCB Bancorp is 1.13 times more volatile than Analog Devices. It trades about 0.1 of its potential returns per unit of risk. Analog Devices is currently generating about 0.03 per unit of risk. If you would invest  1,181  in BCB Bancorp on September 3, 2024 and sell it today you would earn a total of  146.00  from holding BCB Bancorp or generate 12.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BCB Bancorp  vs.  Analog Devices

BCB Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, BCB Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BCB Bancorp and Analog Devices

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

The idea behind BCB Bancorp and Analog Devices 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.