Correlation Between Bid and Advtech

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

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

Diversification Opportunities for Bid and Advtech

0.23

Correlation Coefficient

Bid  Advtech

Modest diversification

The 3 months correlation between Bid and Advtech is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bid Corp. and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech and Bid 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 Bid Corporation are associated (or correlated) with Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Bid i.e., Bid and Advtech go up and down completely randomly.

Pair Corralation between Bid and Advtech

Assuming the 90 days trading horizon Bid Corporation is expected to generate 0.83 times more return on investment than Advtech. However, Bid Corporation is 1.21 times less risky than Advtech. It trades about -0.02 of its potential returns per unit of risk. Advtech is currently generating about -0.02 per unit of risk. If you would invest  4,405,400  in Bid Corporation on December 20, 2024 and sell it today you would lose (75,300) from holding Bid Corporation or give up 1.71% of portfolio value over 90 days.

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

Bid Corp.  vs.  Advtech

Bid Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bid Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Bid is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Advtech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Advtech is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bid and Advtech

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

The idea behind Bid Corporation and Advtech 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.