Correlation Between Byggma and Shelf Drilling

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

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

Diversification Opportunities for Byggma and Shelf Drilling

-0.6

Correlation Coefficient

Byggma  Shelf Drilling

Excellent diversification

The 3 months correlation between Byggma and Shelf is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Byggma and Shelf Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelf Drilling and Byggma 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 Byggma are associated (or correlated) with Shelf Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelf Drilling has no effect on the direction of Byggma i.e., Byggma and Shelf Drilling go up and down completely randomly.

Pair Corralation between Byggma and Shelf Drilling

Assuming the 90 days trading horizon Byggma is expected to under-perform the Shelf Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Byggma is 1.32 times less risky than Shelf Drilling. The stock trades about -0.06 of its potential returns per unit of risk. The Shelf Drilling is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,360  in Shelf Drilling on September 3, 2024 and sell it today you would lose (260.00) from holding Shelf Drilling or give up 11.02% of portfolio value over 90 days.

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

Byggma  vs.  Shelf Drilling

Byggma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byggma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Shelf Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelf Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Shelf Drilling is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Byggma and Shelf Drilling

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

The idea behind Byggma and Shelf Drilling 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.