Correlation Between Beyond Oil and Better Choice

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

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

Diversification Opportunities for Beyond Oil and Better Choice

-0.24

Correlation Coefficient

Beyond Oil  Better Choice

Very good diversification

The 3 months correlation between Beyond and Better is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Beyond Oil and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice and Beyond Oil 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 Beyond Oil are associated (or correlated) with Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Beyond Oil i.e., Beyond Oil and Better Choice go up and down completely randomly.

Pair Corralation between Beyond Oil and Better Choice

Assuming the 90 days horizon Beyond Oil is expected to generate 0.92 times more return on investment than Better Choice. However, Beyond Oil is 1.09 times less risky than Better Choice. It trades about 0.2 of its potential returns per unit of risk. Better Choice is currently generating about -0.01 per unit of risk. If you would invest  107.00  in Beyond Oil on November 28, 2024 and sell it today you would earn a total of  67.00  from holding Beyond Oil or generate 62.62% return on investment over 90 days.

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

Beyond Oil  vs.  Better Choice

Beyond Oil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beyond Oil are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Beyond Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Better Choice

Risk-Adjusted Performance

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Better Choice is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Beyond Oil and Better Choice

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

The idea behind Beyond Oil and Better Choice 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.