Correlation Between BM European and Barratt Developments
Can any of the company-specific risk be diversified away by investing in both BM European and Barratt Developments 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 BM European and Barratt Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BM European Value and Barratt Developments plc, you can compare the effects of market volatilities on BM European and Barratt Developments 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 BM European with a short position of Barratt Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of BM European and Barratt Developments.
Diversification Opportunities for BM European and Barratt Developments
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BMRRY and Barratt is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding BM European Value and Barratt Developments plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barratt Developments plc and BM European 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 BM European Value are associated (or correlated) with Barratt Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barratt Developments plc has no effect on the direction of BM European i.e., BM European and Barratt Developments go up and down completely randomly.
Pair Corralation between BM European and Barratt Developments
Assuming the 90 days horizon BM European Value is expected to under-perform the Barratt Developments. But the pink sheet apears to be less risky and, when comparing its historical volatility, BM European Value is 1.09 times less risky than Barratt Developments. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Barratt Developments plc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 546.00 in Barratt Developments plc on December 29, 2024 and sell it today you would lose (8.00) from holding Barratt Developments plc or give up 1.47% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 90.16% |
Values | Daily Returns |
BM European Value vs. Barratt Developments plc
Performance |
Timeline |
BM European Value |
Barratt Developments plc |
BM European and Barratt Developments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BM European and Barratt Developments
The main advantage of trading using opposite BM European and Barratt Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BM European position performs unexpectedly, Barratt Developments 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 Barratt Developments will offset losses from the drop in Barratt Developments' long position.BM European vs. Wal Mart de | BM European vs. Ollies Bargain Outlet | BM European vs. Dollar General | BM European vs. BM European Value |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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