Correlation Between Butterfly Network and Rotork Plc

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

By analyzing existing cross correlation between Butterfly Network and Rotork plc, you can compare the effects of market volatilities on Butterfly Network and Rotork Plc 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 Butterfly Network with a short position of Rotork Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Butterfly Network and Rotork Plc.

Diversification Opportunities for Butterfly Network and Rotork Plc

-0.68

Correlation Coefficient

Butterfly Network  Rotork Plc

Excellent diversification

The 3 months correlation between Butterfly and Rotork is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Rotork plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rotork plc and Butterfly Network 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 Butterfly Network are associated (or correlated) with Rotork Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rotork plc has no effect on the direction of Butterfly Network i.e., Butterfly Network and Rotork Plc go up and down completely randomly.

Pair Corralation between Butterfly Network and Rotork Plc

Given the investment horizon of 90 days Butterfly Network is expected to generate 1.26 times more return on investment than Rotork Plc. However, Butterfly Network is 1.26 times more volatile than Rotork plc. It trades about 0.19 of its potential returns per unit of risk. Rotork plc is currently generating about 0.01 per unit of risk. If you would invest  192.00  in Butterfly Network on September 13, 2024 and sell it today you would earn a total of  162.00  from holding Butterfly Network or generate 84.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Butterfly Network  vs.  Rotork plc

Butterfly Network

Risk-Adjusted Performance

15 of 100

Good

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

Rotork plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rotork plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rotork Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Butterfly Network and Rotork Plc

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

The idea behind Butterfly Network and Rotork plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.