Correlation Between BCAP Mid and BCAP SET100

Can any of the company-specific risk be diversified away by investing in both BCAP Mid and BCAP SET100 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 BCAP Mid and BCAP SET100 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BCAP Mid Small and BCAP SET100, you can compare the effects of market volatilities on BCAP Mid and BCAP SET100 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 BCAP Mid with a short position of BCAP SET100. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCAP Mid and BCAP SET100.

Diversification Opportunities for BCAP Mid and BCAP SET100

0.46

Correlation Coefficient

BCAP Mid  BCAP SET100

Very weak diversification

The 3 months correlation between BCAP and BCAP is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding BCAP Mid Small and BCAP SET100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCAP SET100 and BCAP Mid 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 BCAP Mid Small are associated (or correlated) with BCAP SET100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCAP SET100 has no effect on the direction of BCAP Mid i.e., BCAP Mid and BCAP SET100 go up and down completely randomly.

Pair Corralation between BCAP Mid and BCAP SET100

Assuming the 90 days trading horizon BCAP Mid Small is expected to under-perform the BCAP SET100. In addition to that, BCAP Mid is 1.1 times more volatile than BCAP SET100. It trades about -0.33 of its total potential returns per unit of risk. BCAP SET100 is currently generating about -0.33 per unit of volatility. If you would invest  978.00  in BCAP SET100 on September 22, 2024 and sell it today you would lose (45.00) from holding BCAP SET100 or give up 4.6% of portfolio value over 90 days.

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

BCAP Mid Small  vs.  BCAP SET100

BCAP Mid Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCAP Mid Small has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Etf's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

BCAP SET100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCAP SET100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BCAP SET100 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BCAP Mid and BCAP SET100

The main advantage of trading using opposite BCAP Mid and BCAP SET100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCAP Mid position performs unexpectedly, BCAP SET100 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 BCAP SET100 will offset losses from the drop in BCAP SET100's long position.

The idea behind BCAP Mid Small and BCAP SET100 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.