Correlation Between Berkeley Energy and Burnham Holdings

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

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

Diversification Opportunities for Berkeley Energy and Burnham Holdings

-0.55

Correlation Coefficient

Berkeley Energy  Burnham Holdings

Excellent diversification

The 3 months correlation between Berkeley and Burnham is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energy and Burnham Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burnham Holdings and Berkeley Energy 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 Berkeley Energy are associated (or correlated) with Burnham Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burnham Holdings has no effect on the direction of Berkeley Energy i.e., Berkeley Energy and Burnham Holdings go up and down completely randomly.

Pair Corralation between Berkeley Energy and Burnham Holdings

Assuming the 90 days horizon Berkeley Energy is expected to generate 1.29 times less return on investment than Burnham Holdings. But when comparing it to its historical volatility, Berkeley Energy is 1.21 times less risky than Burnham Holdings. It trades about 0.03 of its potential returns per unit of risk. Burnham Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,078  in Burnham Holdings on September 26, 2024 and sell it today you would earn a total of  317.00  from holding Burnham Holdings or generate 29.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Berkeley Energy  vs.  Burnham Holdings

Berkeley Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Berkeley Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Burnham Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burnham Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Burnham Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkeley Energy and Burnham Holdings

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

The idea behind Berkeley Energy and Burnham Holdings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.