Correlation Between BHPA and APT Systems

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

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

Diversification Opportunities for BHPA and APT Systems

-0.42

Correlation Coefficient

BHPA  APT Systems

Very good diversification

The 3 months correlation between BHPA and APT is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BHPA Inc and APT Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APT Systems and BHPA 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 BHPA Inc are associated (or correlated) with APT Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APT Systems has no effect on the direction of BHPA i.e., BHPA and APT Systems go up and down completely randomly.

Pair Corralation between BHPA and APT Systems

Given the investment horizon of 90 days BHPA is expected to generate 42.76 times less return on investment than APT Systems. But when comparing it to its historical volatility, BHPA Inc is 1.71 times less risky than APT Systems. It trades about 0.0 of its potential returns per unit of risk. APT Systems is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  0.04  in APT Systems on September 14, 2024 and sell it today you would earn a total of  0.01  from holding APT Systems or generate 25.0% return on investment over 90 days.

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

BHPA Inc  vs.  APT Systems

BHPA Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHPA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BHPA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

APT Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in APT Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, APT Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHPA and APT Systems

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

The idea behind BHPA Inc and APT Systems 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .