Correlation Between Butterfly Network and SJM Holdings

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

By analyzing existing cross correlation between Butterfly Network and SJM Holdings Ltd, you can compare the effects of market volatilities on Butterfly Network and SJM Holdings 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 SJM Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Butterfly Network and SJM Holdings.

Diversification Opportunities for Butterfly Network and SJM Holdings

-0.67

Correlation Coefficient

Butterfly Network  SJM Holdings

Excellent diversification

The 3 months correlation between Butterfly and SJM is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and SJM Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJM Holdings 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 SJM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJM Holdings has no effect on the direction of Butterfly Network i.e., Butterfly Network and SJM Holdings go up and down completely randomly.

Pair Corralation between Butterfly Network and SJM Holdings

Given the investment horizon of 90 days Butterfly Network is expected to generate 1.84 times more return on investment than SJM Holdings. However, Butterfly Network is 1.84 times more volatile than SJM Holdings Ltd. It trades about 0.2 of its potential returns per unit of risk. SJM Holdings Ltd is currently generating about -0.06 per unit of risk. If you would invest  176.00  in Butterfly Network on October 20, 2024 and sell it today you would earn a total of  191.00  from holding Butterfly Network or generate 108.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Butterfly Network  vs.  SJM Holdings Ltd

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.

SJM Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SJM Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Butterfly Network and SJM Holdings

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

The idea behind Butterfly Network and SJM Holdings Ltd 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.