Correlation Between Branded Legacy and BAB

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

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

Diversification Opportunities for Branded Legacy and BAB

-0.71

Correlation Coefficient

Branded Legacy  BAB

Pay attention - limited upside

The 3 months correlation between Branded and BAB is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Branded Legacy and BAB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAB Inc and Branded Legacy 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 Branded Legacy are associated (or correlated) with BAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAB Inc has no effect on the direction of Branded Legacy i.e., Branded Legacy and BAB go up and down completely randomly.

Pair Corralation between Branded Legacy and BAB

Given the investment horizon of 90 days Branded Legacy is expected to generate 3.84 times more return on investment than BAB. However, Branded Legacy is 3.84 times more volatile than BAB Inc. It trades about 0.14 of its potential returns per unit of risk. BAB Inc is currently generating about -0.01 per unit of risk. If you would invest  0.04  in Branded Legacy on October 10, 2024 and sell it today you would earn a total of  0.01  from holding Branded Legacy or generate 25.0% return on investment over 90 days.

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

Branded Legacy  vs.  BAB Inc

Branded Legacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Branded Legacy 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BAB Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BAB Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, BAB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Branded Legacy and BAB

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

The idea behind Branded Legacy and BAB Inc 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.

Check out your portfolio center.

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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.